New Delhi: Commodities have had a brutal selloff late. Infact, from 52-week highs, Nickel is down 70%, steel has declined 44%, Aluminum is off 37%, zinc has fallen 21% while Copper is down 17%. Owing to the decline in commodity prices globally, metal stocks
have witnessed a complete carnage. To understand what this means for the metal sector and how investors should approach the sector now, we spoke to a whole host of experts. Here are the excerpts!
, Senior Editor, S&P Global
Commodity Insights says global metal buyers are stuffed with inventory; they are not looking to buy at the moment. She says mills globally are grappling with the problem of whether they should continue production or not. “Complete selloff in metal stocks is emanating from China;
Rs 50,000-55,000/ton would be a reasonable level for steel”, says Ms Tyagi. She adds on to say that mills in China
are operating at losses but for Indian firms, cutting down production is generally the last resort.
We, at ET Now, also managed to get an analyst perspective on this metal’s saga. Rakesh Arora, Founder, Go India Stocks.com believes bottom in metal stocks has not been fully made yet. He recommends investors to stay on the sidelines. Prices have to go below ‘fair’ level to bring production in line with demand. He says we have not reached the stage where they would want to buy metal stocks. He, infact says, he will buy at a point when steel companies start incurring losses. On the export duty front, he believes we might have to live with export duty for some more time.
To get an on-ground perspective of the situation, we spoke with Brij Bhushan Agarwal, VC & MD of Shyam Metalics & Energy. He told ET Now that he doesn’t see any major setback going forward given that prices have already corrected a lot. On average, prices have corrected by 12%, he says. As far as the margin picture is concerned going forward, Mr Agarwal believes we could feel the impact on margins over the coming quarters although the impact cannot be quantified.