Metals stocks gain after ICRA says primary non-ferrous metal industry’s earnings to remain stable in FY25

Metals stocks gained on the BSE, after credit rating agency ICRA in its latest report has said that primary non-ferrous metal industry’s earnings would remain stable in FY2025, considering steady movement in realisations and an easing of input cost pressure to an extent. The domestic demand growth is expected to remain healthy at around 10% in FY2025 and would significantly outpace the expected growth of around 2% in global demand. The operating margin of domestic players is also likely to remain stable at 17-17.5% in FY2025, like the levels estimated in FY2024. As a result, ICRA maintains a Stable outlook on the sector.

JSW Steel is currently trading at Rs. 838.70, up by 20.90 points or 2.56% from its previous closing of Rs. 817.80 on the BSE.

Tata Steel is currently trading at Rs. 156.10, up by 3.25 points or 2.13% from its previous closing of Rs. 152.85 on the BSE.

Steel Authority Of India is currently trading at Rs. 134.15, up by 0.60 points or 0.45% from its previous closing of Rs. 133.55 on the BSE.

According to the report, the international prices of the three non-ferrous metals viz. aluminium, copper and zinc witnessed divergent trends in March 2024. While aluminium and zinc prices remained range-bound, copper prices increased by around 5% in March 2024 amid expected supply cut by Chinese smelters and the prices are likely to further strengthen as the demand-supply gap widens. An unexpected supply disruption in the copper mines in Chile and Panama saw significant correction in treatment and refining charges (Tc/Rc), with the current spot rate at around $12/tonne compared to $80-85/tonne in 9M FY2024. The sharp correction in Tc/Rc has adversely impacted the copper smelter margins and top Chinese smelters recently agreed to embark on production cuts at loss-making plants, without specifically highlighting the extent of the reduction.

On the domestic front, the report said the apparent consumption growth for non-ferrous metals remained healthy at around 10-13% in 9M FY2024 supported by the Government’s thrust on infrastructure development and favourable demand from the renewables/electric vehicle sectors. While the demand is expected to remain soft over the next two quarters as the Government spending moderates around the General Elections, the overall demand growth is expected to remain comfortable at around 10% in FY2024 and FY2025. In addition, the moderation in coal costs, if sustained, is expected to alleviate input cost pressures to an extent.