The Hindu Business Line : Shipping, auto stocks may see impact of `China factor'

The market analysts do not want to jump to hasty conclusions, but agree that shipping companies would be affected by lower dry bulk freight rates, while the auto sector may benefit from, at least, a temporary arrest in steel prices. Some feel that steel consuming industries like white goods and auto ancillaries, which also use aluminium, might see cost benefits coming their way. However, today's stock prices could not reflect the weakness or strength due to the China factor as the market's preoccupation remained restricted to the domestic poll trends.

According to Mr Gul Techchandani, CIO of Sun F&C, the market sentiment for stocks of shipping, auto, auto ancillary and domestic appliance companies is undergoing a change in relation to the change in demand pattern of China, which is, in turn, affecting global prices for metals and freight rates.

Mr Nikhil Thacker, chief analyst of AC Mehta Investment Intermediaries, said global dry bulk rates, domestic steel and aluminium prices were likely to head for a soft bias. "A correction from the respective tops is well on the cards", he added. Mr Nikhil Vora, Vice-President of SSKI, however, feels that it would be simplistic and premature to conclude that there would be a direct tangible correlation in prices and costs for domestic metal using companies. Mr V K Sharmaof Anagram Stockbrokingsaid that though the auto and ancillary units had faced pressure on steel product price rise in the last few quarters, the strong demand growth had offset it somewhat. "Lower input prices would stop margin erosion. For example, passenger carmakers use around 500 to 600 kg of steel to produce a piece. Any savings in steel price would go to its bottomline," he added.

Between February 5, 2003 and February 20, 2004, global hot-rolled coil price went up by 14 per cent, but domestic prices was up 32 per cent, consuming industry sources claimed.

According to Mr Rajat Dutta of GE Shipping, global dry bulk freight rates have, of late, started giving a sign of a downward correction. SCI has the biggest fleet of dry bulk carriers (22), followed by GE (8), Chowgule (8) and Varun (1). Both the stocks SCI and GE Shipping today declined.