Metal index jumps over 4%; Hindalco, JSW, Lloyds,Tata Steel rally up to 7%

The US government has suspended 26 per cent reciprocal tariffs for India till July 9, 2025; however, the base tariff of 10 per cent will continue to be enforced

Shares of metal companies were in focus on Friday, with the Nifty Metal index surging over 4 per cent on the National Stock Exchange (NSE) in the intraday trade, after the US government suspended the 26-per cent reciprocal tariffs for India till July 9, 2025. However, the base tariff of 10 per cent will continue to be enforced during the period. Moreover, the US government has increased tariffs on China to 145 per cent.

 

Lloyds Metals and Energy, Tata Steel, Hindalco Industries, JSW Steel, Jindal Stainless, Steel Authority of India (SAIL), Vedanta, and Jindal Steel and Power rallied in the range of 4 per cent to 7 per cent on the NSE in the intraday trade.

 

 

At 10:49 AM, the Nifty Metal index, the top gainer among sectoral indices, was up 3.4 per cent, as compared to a 1.7 per cent rise in the Nifty 50 index. The Nifty Metal and the BSE Metal indices rallied 4.4 per cent each in the intraday trade. However, despite today's outperformance, the BSE Metal index has underperformed the market, in the past five trading days, by falling 5 per cent as against a 0.69 per cent decline in the BSE Sensex during the period. 

 

In a separate development, local steel mills have raised prices of hot rolled coil (HRC) by ₹1,500 to ₹2,000 per tonne this week, consequent to the sharp fall in steel imports in India, ICICI Securities said in a note, citing reports.

 

However, the brokerage expects these developments to generate limited benefits for the domestic metal industry as the 25 per cent tariffs on steel and aluminium remain unchanged. Additionally, the increased tariffs on Chinese goods are expected to adversely affect China's economic outlook, carrying the risk of potential dumping elsewhere, including India, given that China accounts for more than 50 per cent of global metal demand.

 

However, a key positive trigger could be China's plans for additional economic stimulus to revive its domestic economy, with top Chinese leaders scheduled to meet on April 11, 2025, to discuss the same.

 

Additionally, the total India steel imports have declined to ~0.3 million tonne in March, 2025, vs more than 0.4 million tonne witnessed in January and February, 2025. Consequently, domestic steel prices are up by nearly ₹5,000/tonne from the 4-year low of ₹47,000/tonne and are currently quoting at ₹52,000/tonne. Thus, with gradual recovery in steel prices and benign lower raw material costs, ICICI Securities expects healthy margin recovery for domestic steel players from Q4FY25 onwards.

 

Further, analysts at Elara Capital expect steel prices to remain flat sequentially, while cost savings due to lower coking coal costs to likely drive sequential improvement in profitability.

 

"We expect the near-term domestic steel demand to be supported by increased infrastructure activity, seasonal demand from the white goods industry, and lower imports. Further, the proposed safeguard duty of 12 per cent on flat steel products is likely to support domestic steel prices in the near term," they said.

 

Word of Caution

That said, with new capacity coming onstream, analysts caution that increased supply could limit sustainability of price hikes. In the medium term, domestic and global oversupply, along with the slowdown of global GDP due to tariff uncertainty, are key causes for concern.

 

The ongoing tariff war and associated uncertainties would impact global industrial production and cause demand destruction for commodities. Analysts at Kotak Institutional Equities estimate an ~18 per cent average downside in Ebitda and a larger correction in fair values for its coverage universe in a bear case scenario, where tariffs stay for a material period. However, the brokerage firm finds steel companies better placed than aluminum due to domestic trade barriers and a likely stimulus by China in H2CY25E to counter weaker exports. They remain cautious on the metals sector and would avoid bottom fishing.