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Metal stocks rallied on Monday, following the surprise >rate cut by China's Central Bank on Friday, in a bid to boost the economic growth of the world's second largest economy.
Stocks of steel companies such as Jindal Steel & Power, Steel Authority of India, Tata Steel and JSW Steel were up 3.5 to 4 per cent on Monday.
Shares of State-owned iron ore miner NMDC and manganese producer MOIL were also up, on expectations of better steel demand (iron ore and manganese are inputs into steel-making) and prices.
The rate cut, the first time since 2012, has raised the hopes of boosting the demand for commodities from China — the world’s largest consumer of many industrial goods such as steel, coal and iron ore.
Steel, iron ore prices
Owing to weak demand, steel prices (China domestic) are down 14 per cent so far this year. Global iron ore prices too have been on a downtrend and NMDC’s shares have been hammered down by 25 per cent since September 2014.
Likewise, weakness in manganese prices has forced MOIL to cut its ore price by 5-10 per cent for different grades in the December quarter.
A slowdown in Chinese industrial growth and an increasing shift by the country towards a more environment-friendly growth have hurt the demand for many globally traded commodities. For instance, the growing focus on the use of green energy sources and the shutdown of polluting steel units have hurt the demand for coal and steel.
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