Metal Stocks Outlook: To track spreads, Apr-Jun earnings next week

15 Jul 2022

Shares of metal companies will react to mixed cues on falling trend in coking coal prices and demand sluggishness in the sector. It will also factor in the sharp declines being seen in the June quarter net profit of metal companies who have reported their earnings.

Jindal Steel and Power, which announced its Apr-Jun earnings today, reported a 22% fall in its consolidated profit as operating expenses surged. The only respite was a volume growth and a strong improvement in realisations.

This week, metal stocks moved in a narrow range as uncertainties prevailed on subdued domestic and global demand. Nifty Metal index was up marginally by 0.7% on the week.

Metal sector analysts will be closely watching the June quarter results disclosures by metal companies and the management commentary in the post-earnings conference calls with investors.

The Jindal Steel management today said in an investor conference call that it had operated under “challenging market conditions” during the June quarter. The company confirmed market concerns of exports getting adversely affected by the hike in export duties in May and that its export volumes fell 28% in Apr-Jun as compared to the previous quarter.

The market is likely to watch for updates to the downward trend in coking coal prices which has been offsetting decline in commodity prices and the consequent pressure on profitability of metal companies.

"While sharply reduced coking coal price has resulted in substantial improvement in spreads for domestic steel players, we still see headroom for further price correction as demand remains tepid and buyers expect reduced coking coal cost to be passed on," brokerage Edelweiss Securities in a report on Thursday.