Strong demand, rising prices brighten near-term outlook for metal stocks

Steel prices have rebounded and domestic demand is firm, while non-ferrous metals benefit from tight LME inventories and global supply issues, supporting a positive near-term view on metal stocks

The metals space had divergent trends in Q3FY26. Steel players were impacted by weak prices, while producers of non-ferrous metals mostly benefitted from uptrends. Delayed safeguard duty has now been imposed on steel imports and Chinese exports have slowed.

 

Given steady domestic demand which led to steady volumes, this could lead to a rebound for domestic steel producers. Domestic steel realisations declined year-on-year (Y-o-Y) and quarter-on-quarter (Q-o-Q) in Q3FY26, despite a sharp fall in imports. Operating profit per tonne declined Q-o-Q and Y-o-Y for all steel companies. Prices have rebounded by over ₹3,000 per tonne since December 2025 and remained firm in Q4, on the back of seasonally strong construction demand. 

Even though coking coal prices are moving up, higher steel prices could lead to improved margins in Q4FY26. Downstream ferrous pipe players did well, however, in Q3FY26, with APL Apollo Tubes seeing volume growth and margin expansion on the back of weaker than expected steel prices. Given strong demand, the tubes and pipes sector could continue to yield strong returns. 

Among major non-ferrous players, Vedanta’s current share price is driven by the corporate restructuring, rather than commodity fundamentals. Hindalco Industries reported robust India operations, aided by higher aluminium prices, but the consolidated performance was hurt by fire at a Novelis facility. National Aluminium Company Limited’s (Nalco) consolidated revenue was ₹4,731 crore, up 1 per cent Y-o-Y and up 10 per cent Q-o-Q, in line with consensus. Operating profit stood at ₹2,179 crore, down 6 per cent Y-o-Y, but up 13 per cent Q-o-Q.

 

In Q3FY26, aluminium, zinc, and copper spot prices were strong, rising on lower London Metal Exchange (LME) inventory, weaker dollar, and lower Chinese aluminium exports. However, the LME lead spot price was a little lower Q-o-Q. Chinese net aluminium exports during CY25 declined by 24.3 per cent to 2.2 Mt (vs CY24). Global alumina futures prices are now 3.5 per cent below the Q3FY26 average and at 10.3 per cent of spot LME aluminium prices, alumina futures are below the long term average of 16.1 per cent. Lower alumina prices could lead to better margins for some producers.

 

The dollar index is down M-o-M and Y-o-Y. The rupee depreciation may also aid in higher realisations for domestic players. Weaker caustic soda prices and lower thermal coal costs should also improve margins of domestic non-ferrous companies. Higher US aluminium premiums due to US tariffs may also help Novelis. China has imposed an aluminium production cap of 45 million tonnes per annum (mtpa), and there are also supply constraints due to smelter disruptions in Iceland and Mozambique, and lower LME inventory. This should support high aluminium prices in the short-term.

 

Spot LME Aluminium, zinc, and copper inventory levels were all double digit percentages lower on Y-o-Y basis, while lead inventory was higher. Month-on-month, aluminium and zinc inventory at LME is also down, though lead and copper inventories are up.

 

LME zinc spot prices are up, even as global refined zinc was in surplus of 76 kilo tonnes (Kt) during January-October 2025, and a surplus is expected in CY26. The global lead metal market was in surplus during the period and is expected to be in surplus in CY26. The global refined copper market was in surplus over January-November 2025, but may be in deficit in CY26.

 

The low LME inventories and demand driven by EVs, renewable grids, and data centres could continue to sustain prices for most non-ferrous industrial metals. In India, the GST cuts should push household demand for aluminium and copper. Demand is resilient in battery storage, and in the packaging and electrical sectors across US and Europe, which is beneficial for aluminium, zinc and copper producers.

 

In 2026, supply-side issues may offset aluminium smelter capacity expansions in Asia (ex-China), while Chinese output is constrained by the production capacity cap. In CY26, Norsk Hydro estimates primary aluminium global supply-demand balance may be almost equal or in marginal surplus. US tariffs have hit LME and physical premiums. US premiums have increased strongly while the rest of the world premiums showed volatility in anticipation of diverted US-flows.

 

Alumina prices averaged $318 per tonne in Q3FY26, down 12 per cent Q-o-Q and 54 per cent lower Y-o-Y, due to high spot availability from refinery expansions in Indonesia, China and India. Bauxite prices held steady but a price drop may arise if suspended mining projects are resumed.