Nifty Metal index up 2%; SAIL, Tata Steel, JSPL, JSW Steel gain up to 5%

In the past six months, the Nifty Metal index has underperformed the market by falling 6 per cent as against a 4 per cent decline in the benchmark index

Shares of metal companies were in focus today, with the Nifty Metal index outperforming the market on the back of 2 per cent gain on the National Stock Exchange (NSE) in Thursday's intraday trade. The bounce back in metal stock comes after a correction earlier this week on Trump's metal tariff hike plan. In comparison, the Nifty 50 index was up 0.70 per cent at 11:35 AM.

 

Steel Authority of India (SAIL), Tata Steel, Hindustan Copper, Jindal Steel and Power (JSPL), JSW Steel, NMDC, Vedanta, and National Aluminium Company from the Nifty Metal index were up in the range of 2 per cent to 5 per cent.

 

 

In the past one month, the Nifty Metal index has rallied 6 per cent as compared to a 0.5 per cent rise in the Nifty 50 index. However, in the past six months, the metal index has underperformed the market by falling 6 per cent as against a 4 per cent decline in the benchmark index.

 

The domestic steel sector is characterised by demand cyclicality, volatility in raw material and metal prices, high regulatory risk, and the risk of imports. In addition, metal prices heavily depend on international prices, as the domestic market is open for imports. Steel producers are generally impacted by a weak rupee/dollar due to the imports of coking coal. However, the risk is somewhat mitigated by hedging and import parity of metal prices.

 

China has been a key exporter in the international market in the recent past and accounts for about 50 per cent of the global steel production. Therefore, any change in its economic policies that could impact the government's infrastructure spending or tightening of environmental norms could materially impact steel prices, according to India Ratings and Research (Ind-Ra).

 

On Tuesday, February 11, 2025, the domestic rating agency upgraded Tata Steel's long-term debt rating to 'IND AAA' from 'IND AA+' with a 'Stable' Outlook.

 

Tata Steel share price gained 4 per cent today, to hit a high of Rs 137.44 on the NSE in the intraday trade. In two days, the stock has gained nearly 6 per cent. Moreover, it has recovered 12 per cent from its 52-week low of Rs 122.62 touched on January 13, 2025.

 

SAIL share price, meanwhile, rallied 5 per cent today to a high of Rs 110.79, surging 11 per cent in the past two trading days. The stock of the state-owned company had hit a 52-week low of Rs 99.15 on Wednesday, February 12, 2025. It has corrected 43 per cent from its 52-week high level of Rs 175.35 touched on May 22, 2024.

 

In Q3FY25, SAIL's sales volumes witnessed a steady growth in the quarter. However, the company witnessed a sharp decline in steel realisation, down by Rs 5,000/tonne quarter-on-quarter (Q-o-Q) to Rs 55,200/tonne in Q3FY25 - the steepest fall among major steel players.

 

Additionally, Ebitda/tonne declined by Rs 2,500/tonne Q-o-Q despite coking coal price staying low in Q3FY25, according to ICICI Securities.

 

The brokerage firm said they look forward to management's insights on the overall steel demand and profitability outlook. Furthermore, any potential imposition of duties on steel imports will have a positive impact on the company, it added.

 

According to analysts at Elara Capital, the reductions in steel imports in the past two months have been attributed to the expiration of BIS certification for international mills. However, with the expected renewal of BIS certification for a Vietnam-based mill in January 2025, steel imports to India may see an uptick by mid-CY25, particularly following the completion of the ongoing anti-dumping investigation (assuming that no safeguard duty is imposed).

 

Also, post the Chinese New Year, ramp-up in China's steel production with the US tariffs on indirect steel exports may exert downward pressure on global steel prices. Given these dynamics, the brokerage firm believes long products will outperform flat products in the ferrous sector.