The second quarter of fiscal year 2026 (Q2 FY26) is proving to be a tale of two markets for the metal sector. Analysts estimate that while steelmakers struggled with seasonality and pricing pressure, non-ferrous producers are set to post stronger margins, weighed by the global commodity rally.
Steel Hit by Seasonal Slump and Pricing
The ferrous segment (steel) is expected to face a profitability contraction, primarily due to sharply lower realizations. Benchmark flat steel (HRC) prices declined sequentially by Rs 2,000 per tonne, hurt by a protracted monsoon and a slowdown in construction activity.
This is expected to dent operating performance, with most players likely seeing an EBITDA decline of Rs 1,000–Rs 3,000 per tonne. However, volume growth is expected to be surprisingly strong on year-on-year basis and is projected to cushion the fall in profits to an extent.
Tata Steel may standout as a key outlier in the ferrous space, driven by high volume execution in India and improved sequential profitability at its European operations. Analysts remain Bullish on JSW Steel which is attributed to factoring in EBITDA from BPSL.
SAIL may witness some pressure due to the sharp drop in long steel prices, reinforcing concerns over the company's inefficient cost structure and susceptibility to price volatility.
Non-Ferrous Shines on LME Boost
The non-ferrous segment is poised to significantly outperform the ferrous sector. LME prices for Aluminium, Zinc, Copper, and Silver saw strong sequential increases (Aluminium and Zinc up 6−7%), with the 2% depreciation of the Indian Rupee further supporting domestic realizations.
These factors are expected to translate into improved EBITDA for non-ferrous companies, despite a slight increase in the cost of production.
Hindalco's consolidated numbers are expected to be mixed, as strong domestic performance is likely to be partially offset by a projected decline in profitability at its U.S. subsidiary, Novelis, due to tariff impacts and subdued automotive shipments.
Vedanta is specifically poised to benefit from its pure-commodity exposure, translating the sharp LME price jump directly into robust margin uplift. Similarly, Hindustan Zinc is expected to showcase strong sequential earnings, capitalizing on the surge in global Zinc prices.
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