The BSE Metal and the Nifty Metal indices hit their respective 52-week lows during Friday’s trading session. The BSE Metal index closed the day 3.42 percent lower at 10,266.29 points while the Nifty Metal index closed 3.36 percent down at 2,740.5 points. On the Nifty Metal index, SAIL was the biggest loser, closing 8.43 percent lower at `44.5.
Other losers in the pack include Vedanta, Jindal Steel, Tata Steel, JSW Steel, Welspun Corp, Hindustan Zinc, Coal India, APL Apollo Tubes and NMDC.
Share prices of metal companies fell between 0.83 percent and 8.43 percent on Friday.
Except National Aluminium Company, which closed up 0.68 percent, all other metal stocks closed in red.
Analysts said slower economic growth in large metal consuming geographies (Europe, the US and China) would lead to subdued demand in CY19. “3Q should mark the start of a margin slide at Indian steel companies. The full impact of the fall in steel prices would be reflected in 4Q,” said Bhaskar Basu, equity analyst at Jefferies, in a report.
Kotak Institutional Equities (KIE) expects the EBITDA for steel companies to decline by 11-28 percent sequentially due to lower steel prices and increase in raw material costs. “3Q would reflect only partial impact of steel price correction as most of the price fall was in December. The full impact should come through in 4Q (usually seasonally strongest quarter),” said Jefferies.
The impact of growing tension in merchant trade following imposition of additional tariff on steel and aluminium by the US and the US-China stand-off have affected the stability and efficacy of the global steel trade, Sushim Banerjee, director general at the Institute for Steel Development & Growth, had said earlier in an article in FE.
Demand has weakened in China due to slowdown in the real estate and automotive sectors amid the Sino-American trade war. “We believe despite strong fundamentals for base metals, coupled with falling inventories, prices may remain subdued in CY2019 on weaker demand,” KIE said in a report.
Kotak Institutional Equity analysts Abhishek Poddar and Prayatn Mahajn explained in the report that global markets were in deficit of 2 million tonne (in CY2018) which will only get worse given tightness in supply. “We expect CY2019E to be in deficit again due to supply deficit in World ex-China markets,” the KIE report said.