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Metal sector commences CY23 on buoyant note
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What's Buzzing
China easing Covid related restrictions and reopening had led to an uptick in global metal prices thereby auguring well for Indian metal players.
Context
Easing of Covid related curbs by the world’s largest metal consumer China has spurred hopes of a demand recovery and aided an uptick in Indian metal & mining stocks. China has already downgraded Covid management to the less strict category B and also scrapped all restrictive measures for incoming travellers and goods.
Our Perspective:
Aided by the relaxation of Covid-19 related restrictions in China, CY23 has started on a positive note for the metal sector. Over the last couple of months, steel prices in China have seen an uptick of ~20% and are currently quoting at ~US$620/tonne. Chinese steel prices have bounced back sharply from a low of US$515, which it hit in November 2022. Also, recently, Chinese regional players have taken price hikes for February 2023 shipments, mainly on hopes of a demand recovery in China post the Chinese New year. Baosteel has raised prices for HRC, CRC and heavy plates by US$15/tonne for February 2023 shipments. Aided by an uptick in global steel prices, during the first week of January 2023 Indian steel players have already taken a price hike of ~Rs 1500-2000/tonne for the domestic steel market. Post this hike, domestic HRC prices are currently quoting at a three-month high of Rs 56500-57000/tonne. Also, seasonally, Q4 is the strongest quarter in terms of sales volumes for domestic steel companies. An uptick in prices, during this period, augurs well for domestic steel players. With improving sentiments in China coupled with healthy domestic steel demand, steel prices are likely to remain firm, going forward also. There was also a steady uptick in base metal prices. Over the last one month, copper prices on the LME have increased by ~9% and are currently hovering at ~US$9170/tonne while aluminium prices on the LME have seen an uptick of ~6% and are currently hovering at ~US$2570/tonne. In general, an uptick in global metal prices augurs well for domestic metal companies and is likely to have a positive rub-off on the financial performance of the companies, going forward.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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