An imminent steel production cut in China is likely to provide a much-needed boost to the Indian metals & mining sector.
Sharing some valuable insights on the sector in a recent interview with CNBC-TV18, Vikash Singh, Vice President, Metals and Mining at Phillip Capital, touched upon the role of the Chinese government in shaping the metal industry's future.
He noted that while there haven't been any concrete announcements from the Chinese government, there is a growing expectation of some stimulus measures there.
Singh highlighted China's continued commitment to maintaining steel production. This commitment is significant, as China is the world's largest producer and consumer of steel. "China has a tendency to keep steel production intact at least if not higher on a year-on-year (YoY) basis," Singh stated.
However, during the initial seven months, China has experienced a 2.5 percent increase, prompting the need for a 4 percent reduction in the following five months compared to the previous year. Therefore, the focus is not on an increase in demand but rather on the expected production cuts in China. This strategy aligns with the fact that Chinese mills are currently struggling to generate profits.
In the context of the Chinese production cut, Singh's positive outlook is more on the ferrous segment of the sector.
"We are betting more on ferrous than non-ferrous segment," he said.
“Ferrous, in the next six months would do much better than non-ferrous because non-ferrous does not have that luxury of Chinese production cuts or even a better domestic demand,” he said.
In addition to his insights on the broader market, Singh also shared his perspective on NMDC Steel. He suggested that investors should "expect some profit booking at this price for NMDC Steel."
For more details, watch the accompanying video
(Edited by : C H Unnikrishnan)
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