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Deeptha Rajkumar

WITH the benchmark international prices of metals such as aluminium and copper touching new highs, the market appears to be riding the crest of `metal' success.

Metal stocks such as Hindalco, Nalco, Sterlite and Tata Steel have all been gaining strength on the bourses, backed by the perception that the current global demand-supply scenario for metals favours the industry right now.

While demand for these commodities is largely driven by the South-East Asian economies, especially China, a recovery in the US economy will provide a shot in the arm for the metal industry, Mr Hanu Bhatia, vice-president, equities, Parag Parikh Securities, said.

Reiterating this, analysts add that the US GDP growth for the second quarter has been pegged at around 7 per cent in the second quarter. "Clearly a positive sign as it should push up their consumption levels, which in turn would sustain prices," an analyst reasoned.

However, even if the US economy were not to show aggressive signs of recovery, there is expectation that the money will flow into other avenues like gold, metals, or emerging markets.

"Gold prices are currently ruling firm and there is no denying that the emerging markets are attracting money. Either way it is a win-win situation for the industry," Mr. Bhatia added.

One of the key drivers for the stock prices of Hindalco and Nalco has been the international aluminium price, which is currently ruling at $1,502 per tonne.

Analysts maintain that sustained demand for aluminium and alumina by China has been supporting the high prices in the international market. Firm alumina prices in the current fiscal - $250-300 - is another reason for the stock price of Nalco gaining ground, given that it has a larger alumina presence.

According to Mr Bhatia, the global supply-demand mismatch is likely to see aluminium prices touch a new high of $1,730-50 per tonne in the short term.

In a significant move, aluminium major Hindalco today hiked its prices by Rs 2,000 per tonne, which has led brokers to predict that the stock will touch Rs 2,000 levels over the next six months.

The stock, which has appreciated by over 46 per cent from its levels of around Rs 870 in August beginning, hit a new high of Rs 1,250 intra-day on both the NSE and BSE today.

Better steel realisations have kept the Tata Steel counter buoyant over the last 6-7 months. While there have been concerns on the export front over restrictions being imposed by US and China on steel, the market is of the view that the `China' factor will continue to support prices.

Firm copper prices, currently ruling around $2,075 per tonne, has seen the stock price of Sterlite Industries appreciate by almost 151 per cent from around Rs 370-odd levels in August beginning to its current Rs 929 levels. Hindalco has also benefited from the high copper prices as it derives almost 55 per cent of its revenues from copper.

"Currently there is a copper famine in India. There are no opportunities for further mining which is one reason why companies like Hindalco and Sterlite have acquired additional copper mines overseas for captive consumption," Mr Bhatia said.

According to him, copper prices are expected to touch $2,400 per tonne in the short to medium term.

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