Major domestic aluminium and steel exporters saw their stocks reflect this sentiment after the US President’s 10 February announcement. Aluminium producers such as National Aluminium Co Ltd (Nalco) and Vedanta Ltd fell 2-4%, while steel companies such as Tata Steel Ltd and Steel Authority of India Ltd declined 3-5% on 11 February.
The broader Nifty Metal slid 2%.
Two stocks bucked the trend. Steel producer Jindal Steel And Power Ltd (JSPL) fell 1%, while aluminium maker Hindalco Industries Ltd’s share price remained unchanged.
Experts suggest companies with strong volume growth prospects, diversified product portfolios, and planned expansions are well-positioned to navigate potential geopolitical headwinds.
JSPL and Hindalco are analysts’ top choices in the ferrous and non-ferrous sectors, respectively, as they have moats that can withstand global threats.
As of now, global aluminium and steel prices have remained relatively stable despite recent tariff threats, likely due to uncertainty about their implementation and potential negotiations before the 12 March deadline, noted Kaynat Chainwala, associate vice president of commodity research at Kotak Securities Ltd.
“But (both aluminium and steel) prices may come under pressure if tariffs are implemented, as this could intensify competition in export markets and raise the likelihood of retaliatory measures,” Chainwala added.
She expects aluminium prices to fall less than steel prices, as the base metal benefits from tighter supply and stronger demand prospects than its ferrous counterpart.
Ferrous metals face a meltdown
While global demand for base metals such as aluminium, zinc and copper remains robust, ICICI Securities Ltd expects improving domestic consumption growth in Q4FY25 to support falling steel prices, provided imports remain low.
Low steel price realization and falling export volumes have already impacted major producers in the December quarter. Standalone net profits are down 18-47% on-year at Tata Steel, Jindal Stainless Ltd, JSPL, and JSW Steel Ltd.
“If steel prices fall further, dealers will lower their inventories first before entering new contracts. This will hit the domestic producers’ volume growth even more amid the influx of Chinese steel in the country,” said Mohit Khanna, fund manager at Purnartha Investment Advisers Pvt. Ltd.
To be sure, India became a net importer of steel in 2023-24, falling prey to cheap Chinese imports of hot-rolled coil steel.
Experts believe there will be little respite from imports as China’s own demand remains weak, and the Indian government is unlikely to impose any safeguard duty on steel imports to keep domestic inflation in check.
“A weakness in Chinese demand, despite economic stimulus measures, has led to lower global steel prices, putting pressure on steel spreads (profitability of producing steel),” highlighted Aditya Welekar, senior metals and mining analyst at Axis Securities Ltd.
“Lower steel spreads and falling steel exports from India due to intense competition from China will put pressure on the profitability of Indian steel mills in the near term,” Welekar said.
While high iron ore prices further suppressed profit margins in the third quarter, steel producers expect some margin respite from the current lower prices of iron ore and coking coal in the fourth quarter.
However, Elara Securities said in a recent report that only companies like JSPL, which have more exposure to long steel products like bars, rods, and structural items, are expected to benefit from the upcoming construction season in the near term.
The brokerage also warned that JSPL’s humongous ₹23,400 capital expenditure plan over FY26-28 would be an overhang on its profitability going forward.
Non-ferrous metals may outshine
Meanwhile, global demand for aluminium, copper, and zinc outstripped supply, contributing to their elevated prices in the December quarter.
Spot alumina prices peaked at $810/tonne in December due to refinery shutdowns at Rio Tinto, a global mining and refining corporation, and a constrained supply of bauxite—the mineral required to produce aluminium—from major producer Guinea.
Since alumina prices shot up 38% and aluminium prices rose 8% on-quarter, analysts were betting on upstream companies such as Hindalco and Nalco to post solid results in the third quarter.
Though Nalco posted a 233% year-on-year jump in its consolidated net profit to ₹1,566 crore, it was mainly aided by a huge turnaround in the operating profits of its chemical business. Its core business saw modest growth.
While Hindalco is yet to announce its results, its subsidiary Novelis has reported a 22% on-year fall in its third-quarter net profit due to rising global scrap costs. Even though Novelis’s management said scrap spreads bottomed out in the quarter, they indicated a tightness in scrap availability due to rising Chinese scrap demand.
Novelis’s management said the company might be exempted from Trump’s tariffs. If not, then tariffs will have little bearing on the company’s earnings as it would pass on any price hike in aluminium as higher midwest premiums in the US.
Midwest premium is the regional price of pure aluminium supplied to the midwest region of the US and serves as a good proxy for the country’s domestic aluminium demand.
“We remain constructive on Hindalco because it has better volume growth prospects than Nalco, which is a pure play on aluminium prices,” said Tushar Chaudhari, lead analyst at PL Capital, in an earlier interview with Mint.
“With supply constraints easing, alumina and aluminium prices will likely decrease. Hence, the fourth quarter might not be as exciting for Nalco, and we could see further moderation in its stock price,” he added.
