Vedanta To Hindalco: Indian Metal Stocks Rally On China Demand Optimism
April and May typically witness increased building activities in China, contributing to a surge in demand for steel.
Shares of iron ore companies rose on Tuesday as prices of the mineral rebounded from a 10-month low, reflecting the renewed investor confidence in the market's resilience. The prices had witnessed a 9% slump in the past two weeks, but investors are now betting on a swift recovery in demand, viewing the recent selloff as overdone. Futures in Singapore have climbed 2.7% to $107.10 a tonne, building on a 6% rally in the previous day.
April and May typically witness increased building activities in China, contributing to a surge in demand for steel. Iron ore inventories at Chinese ports are displaying signs of stabilisation, with volumes declining last week from peak levels observed since February 2023.
Street View
Citi Research anticipates volumes to improve quarter-on-quarter, while year-on-year trends may be more muted with growth ranging from minus 6% to 6%. Tata Steel India Ltd. will be at the upper end of the spectrum, it said.
Axis Securities Ltd. also expects a good quarter for base metal stocks, while Hindalco Industries Ltd. and National Aluminium Co. are likely to see margin growth YoY/QoQ. Its top picks among ferrous stocks are Hindalco, Nalco and Tata Steel.
Implication For Indian Metal Stocks
Shares of Indian metal companies were trading in green on Tuesday, with Vedanta Ltd.'s stock jumping as much as 3.8% during the day. Steel Authority of India Ltd.'s stock was up 3.4%, while both Nalco and Hindalco stocks were up 2.5% each.