Metal stocks hit by slowing demand

| Updated on: Jul 13, 2012

Weak Chinese economic data make an impact

Metal company stocks were battered due to the slowdown in demand for metals even after the recent cut in prices.

The BSE metal index was down 124 points at 10,641 even as the benchmark Sensex closed marginally lower by 19 points.

Sesa Goa, a Vedanta Group company, plans to suspend production at its two plants. The decision was taken after the Goa Government banned the company from transporting iron ore from its mines due to monsoons.

The company will shut down two blast furnaces and metallurgical coke plant. It has an annual production of 2,50,000 tonnes of pig iron. It also generates 60,000 tonnes of slag which is sold to the cement industry.

Negative news

Sesa Goa's metallurgical coke division operates 84 non-polluting, non-recovery type coke ovens producing 2,80,000 tonnes of low ash metallurgical coke a year. Profitability of the company is already hit by the iron ore mining ban in Karnataka.

On Friday, Tata Steel said that its saleable steel output was down at 1.74 million tonnes (mt) in the June quarter against 1.75 mt in the same period last year.

Mr Alex K. Mathews, Head Technical and Derivatives Research, Geojit BNP Paribas Financial Services, said the metal sector was also impacted by the weak Chinese economic data, which indicated its slowest expansion in three years.

“Investors are expecting serious policy easing measures from China in the near-term,” he said.

The global crude steel production has been moderating in the last few months on concerns over a slowdown in China. Steel prices have fallen sharply across the globe. In India, prices are still holding due to the rupee depreciation against the dollar. However, demand has slowed down considerably.

Prices of base metals such as aluminium, copper, nickel, lead and zinc are also down sharply. It has fallen on an average 4-9 per cent in the first quarter of this fiscal. Aluminium prices declined nine per cent to $1,986 a tonne in the first quarter.


Published on July 13, 2012

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