The Hindu Business Line : Global sentiment weakens steel, aluminium stocks

DECLINE in global ferrous and non-ferrous metal prices in the last two days affected prices of stocks of local metals and mining heavyweights. Though the local steel players are relatively insulated from the global price trends, as export-domestic sales ratio is low, the steel stocks tanked as overall sentiment nosedived.

The Tata Steel stock went down by about 4 per cent, while SAIL dipped by around 6 per cent.

In case aluminium stocks, Hindalco shed around 6 per cent and Nalco about 4 per cent.

The iron ore exporter, Sesa Goa slipped by about six per cent too.

Apprehension over a fall in demand prompted metals prices to register decline.

According to metal analysts, the metal prices, which had registered multi-year high on the LME earlier this week, reacted sharply to several bits of negative news in the later part of the week.

Production and job cuts by some of the leading carmakers and drop in the Chinese demand reportedly put pressure on the prices.

Arcelor, the largest European steel producer announced production cut apprehending a 14 per cent drop in apparent demand. ACEA, the European association of car manufacturers reported fall in car registration in February last.

US steel makers have, of late, complained about deteriorating outlook. In an interesting turn of the events, China's 16 major steel mills took stand on April 11 that they would rather cut their production than to accept the "unreasonable" price hike demand of the overseas iron ore suppliers.

As a result, on Wednesday, Australian mining major BHP Billiton agreed to forego its demand for a freight premium of around $10 per tonne of iron ore sold to China.

An analyst with a multinational bank told Business Line from Singapore that Chinese manufacturers are seeking to step up efforts to coordinate between steel producers and ore suppliers further perfect price-setting mechanism.

For local steel major Tata Steel the apprehensions are that may have been hit by blast furnace shut down in the fourth quarter of 2004-05. According to Mr Deepak Jain of Anagram Stockbroking, owing to higher utilisation of sponge iron performance may have been little lower than the usual.

In case of Hindalco, as aluminium prices at parity with the international prices, the current dip may affect the realisation. "Moreover, domestic aluminium makers may be impacted negatively by the lower import duty," Mr Jain added.

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