Stories
Metal Stocks Brace for Mixed Q2 as Steel Margins Fall
- •Ferrous metal companies anticipate a 15-25% sequential volume growth in Q2 driven by capacity ramp-ups.
- •Steel realisations are expected to drop by ₹500-1,300 per tonne, with long steel facing a sharper fall.
- •Higher coking coal costs and falling margins will weigh on steel EBITDA per tonne, though absolute EBITDA may rise.
- •Non-ferrous earnings show a mixed outlook, with aluminum EBITDA declining while zinc earnings rise.
- •HSBC remains positive on aluminum, predicting firm prices due to tight supply and strong demand growth.
Key Questions Answered
Ferrous metal companies could experience a sequential volume growth of 15% to 25% in Q2FY27 due to capacity ramp-ups following previous maintenance shutdowns. However, declining steel realisations and rising coking coal costs are expected to push per-tonne EBITDA down by ₹600 to ₹2,200 sequentially, though absolute EBITDA for most steel companies should increase by 10% to 13% on higher volumes.
The outlook for non-ferrous companies is mixed. Lower aluminium prices could lead to an estimated 8% decline in Hindalco's India EBITDA (including Utkal Alumina) and a 4% fall for Vedanta Aluminium, whereas higher zinc prices are expected to boost Hindustan Zinc's EBITDA by about 5% and Vedanta's by roughly 7%.
HSBC forecasts aluminium to average close to $3,400 to $3,500 next year, expecting prices to remain firm despite recent corrections. The longer-term outlook remains supportive because demand growth is projected to outpace additional capacity additions and new supply over the next few years, keeping the market tight.
