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Jindal Steel, JSW, Vedanta: Nifty Metal dips over 1% on China slowdown woes

Jindal Steel, Welspun Corp, JSW Steel, and Vedanta led the losses, dropping 2 per cent each. NMDC, National Aluminium, Hindalco, Jindal Stainless, Tata Steel and SAIL lost up to 1.5%

Steel, China steel

Workers prepare to lift a bundle of steel reinforcing bar with a gantry crane at a metal stock yard in Shanghai, China, on Monday, June 7, 2021. Photographer: Qilai Shen/Bloomberg

SI Reporter New Delhi

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The Nifty Metal index was the leading sectoral loser, slipping 1.3 per cent to day's low of 6,515, in Friday's weak market amid growing concerns of a significant slowdown in the Chinese economy. 

Among the index's constituents, Jindal Steel, Welspun Corp, JSW Steel, and Vedanta led the losses, dropping 2 per cent each. NMDC, National Aluminium, Hindalco, Jindal Stainless, Tata Steel and SAIL were the other losers, down up to 1.5 per cent. 

China, which accounts for almost half of the world's metal consumption, is facing headwinds of an economic slowdown, which poses a key threat to global commodities demand including steel. 

Shrinking demand leads to lower steel prices globally as well as domestically. 

Various global banks have slashed China's GDP targets for 2023 and expect that the country may grow at a moderate pace of below 5 per cent, which is its offical estimate. The risks have been heightened by the country's ongoing crisis in the property market, deflation, weak exports and a falling yuan.

Industry experts believe the property sector, which drives major demand for metals, is a key pillar of the Chinese economy, and any weakness there could have a wider contagion effect.

The metals and mining sector, back home, saw weak peformance in the April-June quarter, on account of lower sales volumes and drop in metal prices, said a report by Axis Securities. 

The hot-rolled coil steel (HRC) prices ex-Mumbai declined by 15 per cent YoY and 1 per cent QoQ and averaged at Rs 58,500/t during the quarter. The fall was lower than the Chinese HRC prices, which fell by 25 per cent/9 per cent YoY/QoQ, indicating robust domestic demand, it said. 

"China’s domestic demand pick up was weaker than expected. China’s 3MMA floor space started declined by 30 per cent in June 2023. The floor space sold was down 22 per cent YoY, indicating continued weakness in the real estate sector which consumes major share of steel," the report noted. 

If China announces stimulus to tackle its property sector and boost infrastructure, it will be the key monitorable as it poses upside to current steel prices as well as upside risk to our HOLD rating on SAIL and Tata Steel, the report added. 

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First Published: Aug 25 2023 | 3:21 PM IST

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