Prior to the imposition of the tariffs, metal accounted for 6.7% of India’s total exports to the US, according to Nomura. US’ metal exports to India were subjected to a 9.6% levy while the US charged 1.8% on metal imports from India, Nomura said.
The Trump administration on April 2 announced reciprocal tariffs on more than 60 countries with a base tariff of 10%. The reciprocal tariff on India is at 26%. A flat 25% tariff on steel and aluminium imports to the US is already in place since March 12.
While the direct impact of tariffs on the domestic metal industry may be limited, a global slowdown could hurt metal prices, say experts. India also runs the risk of goods from exporting countries getting dumped here.
Gaurav Dua of Mirae Asset Sharekhan said that the global slowdown in trade will still affect some of India’s exporting companies, and for now, he is avoiding steel and metals.
Jai Bala of Cashthechaos.com said that India could become one of the possible dumping grounds as a fallout of curbs or tariffs on metals.The above sentiments have played on the prospects of metal stocks. The broader Nifty index has fallen 2.7% since April 2, while the Nifty Metal index has fallen by nearly 12%, with Vedanta being the biggest loser at 18%. The next to follow are National Aluminium Company (Nalco), Hindalco Industries, and Tata Steel, falling by 16%, 15%, and 14%, respectively.Hindustan Copper, Jindal Steel & Power, NMDC, Steel Authority of India (SAIL), Hindustan Zinc, JSW Steel, Jindal Stainless, Welspun Corp, Lloyds Metals & Energy, and APL Apollo Tubes have fallen between 12.6% and 3.2%.
While Adani Enterprises is also a part of the index, it is not a pure-play metal company.
Crisis playbook
Nuvama Institutional Equities takes a leaf out of the 2008 crisis to summarise key lessons. From the Indian standpoint, markets first sold off owing to liquidity scare as high valuations coupled with rising oil prices and RBI’s liquidity squeeze sapped sentiments, Nuvama noted. In the second phase of sell-off, growth scare triggered a 45% correction in the Nifty in just three months. Cyclicals such as metals clocked over 50% correction.
“Markets made a bottom in November 2008 after a steep correction of 60%, cheapening valuations and policy response reaching critical mass. However, they were range-bound until March 2009. EMs, including India and China too imparted large stimulus along with the US resulting in strong rebound,” the Nuvama note said.
But this time, it could be different as the policy response is disjointed between the US and the rest of the world. Even the Trump administration and the Federal Reserve are not speaking in one voice.
Hopes hinge on Q4FY25
The metals universe is projected to report a strong 24% YoY earnings growth on a low 4QFY24 base and the strongest in four quarters, Motilal Oswal Financial Services (MOFSL) said in a preview note. Notwithstanding this, it remains ‘Underweight’ on metals.
Brokerage firm Axis Securities remains positive on the Q4 prospects of metal pack. In Q4FY25, steel companies under its coverage viz. Tata Steel and SAIL could report a sequential improvement in Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) due to higher sales volume and lower coking consumption costs, partially offset by a slight drop in steel price realisations.
“We expect Tata Steel and SAIL’s EBITDA to increase on a QoQ basis by 6% and 35% respectively,” Axis Securities said.
Meanwhile, aluminium companies Hindalco and NALCO are also likely to post another strong YoY performance in the quarter, gone by. “Both EBITDA and EBITDA margin are expected to expand, led by strong Alumina prices (up 44% YoY) and LME Aluminium prices (up 19% YoY), while sales volumes are expected to remain stable/improve YoY,” this brokerage said.
Among structural steel tube companies, a better quarter for APL Apollo tubes is envisioned while JTL volumes continue to remain weak.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
