Is the rally in metals over? Here's what industry experts say
In an interview to CNBC-TV18, Pinakin Parekh of JPMorgan India and Dilip Oommen, CEO of ArcelorMittal Nippon Steel India spoke at length about the steel space.
Steel stocks are under pressure on fears that the profit margins of companies may contract due to higher input costs. Two key brokerages, Jefferies and Kotak Institutional Equities also sound a cautious note on steel post a stellar 2021. In an interview to CNBC-TV18, Pinakin Parekh of JPMorgan India and Dilip Oommen, CEO of ArcelorMittal Nippon Steel India spoke at length about the space.
First up, Oommen said that steel prices corrected by 7 percent in December 2021. However, prices are stabilising now.
He also said that there are signs of demand improvement across sectors like construction and auto. “There is a pickup in the infrastructure sector and it will continue to improve, there is pent-up demand that will catch up in the coming quarters. In the auto sector, the chip shortage concern has been addressed, so auto should do well. Therefore, we see an improvement in demand in the coming quarters,” said Oommen.
Meanwhile, Parekh said that China's decarbonisation is here to stay and that will be the driver for the steel industry.
He said, “Two things underpinning our overall structural bullish stance. One, China’s decarbonisation is here to stay and commodity prices will settle at higher levels. Second, companies that continue to deleverage will see better equity reflation. So we like both ferrous and non-ferrous. In the near-term, we like ferrous more than non-ferrous because steel prices have unperformed aluminium prices and seasonality is in favour of steel as Chinese demand improves post-New Year.”
For the entire discussion, watch the accompanying video
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