Is the Metal Rally Over? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Is the Metal Rally Over?

May 21, 2021

Shares of metal companies were under pressure at the bourses on 20 May, with the S&P BSE Metal and the Nifty Metal indices falling 4% in intra-day trade. Most metal stocks witnessed selling from recent highs.

Steel Stocks Take a Beating

Domestic steel stocks took a beating after China, the world's biggest producer of steel products, sought stricter oversight of commodity markets to curb exorbitant prices.

On Wednesday, 19 May 2021, China's cabinet vowed to strengthen its management of the commodity supply and demand to curb price increases and prevent them from being passed on to consumers.

The steelmaking hub of Tangshan in China has already announced fresh curbs. This includes ordering sintering units to stop work from midnight to 10am.

The Chinese attempt to rein in skyrocketing prices of steel and iron ore caused a flutter in the market. Steel prices in China have fallen 8-10% in the past week.

Data showed that September iron ore prices on the Dalian Commodity Exchange shed as much as 9% to 1,102 yuan (US$171.2) per tonne. Dalian's most-active contract hit a record high of 1,358 yuan on 12 May.

Iron ore had rocketed to a record high this month amid booming steel market in China and a recovery in global steel demand.

--- Advertisement ---
REVEALED: 3 "Super Smallcaps" You Didn't Know About

You may not have heard of these 3 "super smallcaps" ever before...

The mainstream press doesn't cover them... Most brokers don't know about them either...

Stock like these 3 "super smallcaps" only come to your notice when they have rallied by hundreds or even thousands of percent... and are all over the news!

However, thankfully, our top analyst Richa Agarwal is ready to reveal their details at her Super Smallcaps Summit on 11th August...

Make Sure to Grab Your Free Spot Right Now

Copper Prices Volatile Due to Supply Chain Disruptions

Copper prices capped downside on supply concerns from Chile. However, the metal pared gains on demand growth concerns after China signalled action to curb rising inflation.

Copper prices fell 3% as rising inflation pushed investors into a risk-off sentiment. This offset the impact of potential supply disruptions in the top producing region of South America.

Aluminium Prices Also Hit

Aluminium prices also fell on account of the announcement by China to curb the increases in commodity prices.

Earlier this month, aluminium prices touched a lifetime high on the MCX and near a 10-year high on LME near US$2,500/tonne.

This came on the back of a weaker dollar, tightness in the physical market, supply concerns in China, and decline in stocks at LME warehouses.

Chinese aluminium smelters are facing environment-led production restrictions. A capacity cap is also limiting future additions.

With a strong sequential demand recovery, global utilisation levels have reached a decade high. There is limited spare capacity and a thin pipeline of fresh additions.

While a volume loss from these restrictions are not significant, it adds to the deficit in the market and raises a risk of future restrictions and similar actions by other provinces in China.

Watch Now: Get Details of Richa's 3 Dark Horse Stocks

How the Stock Market Reacted

Among individual stocks, Tata Steel, Steel Authority of India (SAIL), and Jindal Steel and Power (JSPL) slipped 5% each.

Coal India, National Aluminium Company, NMDC, Vedanta, and JSW Steel were down between 2% and 4%.

The Nifty Metal index was down 3% and the S&P BSE Metal index was down 3.7%.

With this decline, the S&P BSE Metal index has now corrected 10% from its record high level of 20,429, touched on 11 May 2021.

For more details about the steel sector, you can have a look at the steel sector report on our website.

You can also compare metal companies with their peers.

SAIL vs Tata Steel

Tata Steel vs JSW Steel


SAIL vs Tata Steel BSL

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Ayesha Shetty

Ayesha Shetty is a financial writer with the StockSelect team at Equitymaster. An engineer by qualification, she uses her analytical skills to decode the latest developments in financial markets. This reflects in her well-researched and insightful articles. When she is not busy separating financial fact from fiction, she can be found reading about new trends in technology and international politics.

Equitymaster requests your view! Post a comment on "Is the Metal Rally Over?". Click here!


More Views on News

HINDUSTAN ZINC Announces Quarterly Results (1QFY22); Net Profit Up 45.9% (Quarterly Result Update)

Jul 26, 2021 | Updated on Jul 26, 2021

For the quarter ended June 2021, HINDUSTAN ZINC has posted a net profit of Rs 20 bn (up 45.9% YoY). Sales on the other hand came in at Rs 65 bn (up 63.7% YoY). Read on for a complete analysis of HINDUSTAN ZINC's quarterly results.

NMDC's Rs 36 bn OFS Puts Stock in Focus (Views On News)

Jul 6, 2021

NMDC shares fall 2% as centre fixes floor price for OFS at 6% discount.

Top 5 Stocks Riding the Metals Rally. Do You Own Any? (Views On News)

Jul 3, 2021

Rising commodity prices have pushed the stocks of these companies to all-time highs.

Why Metal Stocks Are Under Pressure (Views On News)

Jun 20, 2021

Global commodity selloff drags BSE Metal Index 7% during the week, most since May 2020.

Coal India Regains Rs 1 tn Market Cap as it Hits 52-Week High. What's Fuelling the Rally? (Views On News)

Jun 12, 2021

In the past two weeks, the stock has outperformed the market by gaining 12%. Can it go higher?

More Views on News

Most Popular

All You Need to Know About Primary and Secondary Markets

A look at the various types of primary and secondary markets and the key differences between them.

Make Startup Profits from Bluechip Stocks (Profit Hunter)

Jul 21, 2021

A 166-bagger stock can deliver even more gains in this decade.

These Are the Best Stocks to Own (Fast Profits Daily)

Jul 22, 2021

Find out what I think are the best kind on stocks to own in the market.

Cash the Crash in Gas Prices (Fast Profits Daily)

Jul 21, 2021

Get ready to profit from the coming crash in the price of natural gas.

Electric 2-Wheelers: The Megatrend has Begun (Profit Hunter)

Jul 20, 2021

The shift to electric 2-wheelers will be faster than expected.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2021
Get our special report Multibagger Stocks Guide (2021 Edition) Now!
We will never sell or rent your email id.
Please read our Terms