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Systematix Research Report
The recent reopening in China post extensive lockdowns over last three years have caused metal prices to resurge in last three months, amid record-low inventories at exchanges. China's pole position across metals is unlikely to change in the near term.
Also, gross domestic product forecasts of more than 4% growth for CY23/24 implies continued rise in near-term demand (Source: International Monetary Fund). China's steel production declined marginally by 5% in CY21/22, and is slated to rise by more than 5% in CY23 tracking historic GDP growth rates.
Aluminium production growth was steady at 13% in CY22 over CY19, implying a gradual rise in preference for the metal. Lead and zinc metals are forecast to remain in deficit, with demand in excess of mine production for CY23/24, according to the International Lead and Zinc Study Group .
Over the last one month/three months, the BSE metal index recorded up 5/up 15% performance versus down 4%/up 5% by the Sensex.
We expect the significant outperformance in the sector to continue due to supply-side constraints, low inventory in the system, and inexpensive valuations.
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