Metal Stocks Outlook For The Week – 04 To 08.12.2017
The underperformance of metal and mining companies, relative to the broader market, is set to continue for the sixth week in a row next week. While the broader market is seen weak because of the short-term trend turning negative, metal producers are set to see a sharper fall on weak technical trends, and lack of support from base metal prices. Aluminium prices have been subdued on the back of lower than- expected supply cuts in China, and may continue to put pressure on local producers Hindalco Industries and National Aluminium Co. Hindalco, which slipped over 6% this week, and also hit a one month low. Steel producers, meanwhile, may see a lesser fall as compared to their
non-ferrous peers on talk of a price hike for December. Most of these companies are expected to announce prices next week. Apart from pricing, steel companies will also be in focus. The Fitch rating expects demand for steel to grow at around 5% in 2018, driven by a sustained increase in government infrastructure spending. While it is positive on overall sales volume growth for the sector, Fitch has a negative outlook on JSW Steel, which could pressurise the stock. We expect the steel companies to increase their investment in organic growth, in addition to potential acquisitions of distressed assets in the country. This could result in JSW's leverage remaining relatively high based on our rating sensitivities, prompting a ratings downgrade. Among other steel players, Steel Authority of India, which saw a correction this week, is set to resume its uptrend next week.
Source : Cogencis Information Services Ltd.
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The underperformance of metal and mining companies, relative to the broader market, is set to continue for the sixth week in a row next week. While the broader market is seen weak because of the short-term trend turning negative, metal producers are set to see a sharper fall on weak technical trends, and lack of support from base metal prices. Aluminium prices have been subdued on the back of lower than- expected supply cuts in China, and may continue to put pressure on local producers Hindalco Industries and National Aluminium Co. Hindalco, which slipped over 6% this week, and also hit a one month low. Steel producers, meanwhile, may see a lesser fall as compared to their
non-ferrous peers on talk of a price hike for December. Most of these companies are expected to announce prices next week. Apart from pricing, steel companies will also be in focus. The Fitch rating expects demand for steel to grow at around 5% in 2018, driven by a sustained increase in government infrastructure spending. While it is positive on overall sales volume growth for the sector, Fitch has a negative outlook on JSW Steel, which could pressurise the stock. We expect the steel companies to increase their investment in organic growth, in addition to potential acquisitions of distressed assets in the country. This could result in JSW's leverage remaining relatively high based on our rating sensitivities, prompting a ratings downgrade. Among other steel players, Steel Authority of India, which saw a correction this week, is set to resume its uptrend next week.
Source : Cogencis Information Services Ltd.
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