India’s leading metal companies namely Jindal Steel & Power, Tata Steel, SAIL, Vedanta, others have witnessed turn in fortune as the United States and China agreed to settle trade tariff dispute.
Hindustan Copper, Hindalco, JSW Steel, National Aluminium and Hindustan Zinc joined the bandwagon by clocking minor recovery after US President Donald Trump approved trade deal with China.
Last Friday, the US President Trump signed a phase-one trade deal with China, halting the December 15 introduction of a new wave of US tariffs on about $160 billion of consumer goods from the Asian nation.
He had also tweeted that the US and China are “very close” to signing a “big” trade deal, which pushed metal stocks higher.
The tariff war between the two countries has affected the metal sector as it has depressed base metals prices and hurt business sentiments.
During the September quarter, most of the steel companies reported a decline in profit due to lower commodity prices coupled with a slump in demand.
The steel companies faced slowing volumes during the quarter, but they eye a recovery in the second half of the current fiscal.
The outlook for the sector has improved after phase one trade deal.
Though the domestic recovery is still tentative for metal companies, they are now seen as a good trading bet because of valuations.
It is viewed as a contra play because of cheaper valuations.
Meanwhile, global metal prices will now strengthen here on as the growing number of forecasts for Chinese economic growth next year is upbeat.
The International Monetary Fund (IMF) is the latest to voice optimism about growth prospects, with managing director Kristalina Georgieva saying the bilateral agreement that will halt the introduction of new tariff and lower some already in place could boost expansion to about 6% next year, up from its October projection of 5.8%.
China’s growth slumped to 6% in the third quarter of 2019, its slowest pace in nearly three decades, and a number of private-sector analysts are still sceptical about the outlook for the world’s second-largest economy.
Hopefully, the revival of the Chinese economy and resultant strength in metal prices will help India’s metal companies to stage a strong comeback…
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