Metal Sector Report

Metals sector

Market Size

India’s crude steel capacity reached 109.85 Million Tonnes (MT) in 2014-15, a growth of 7.4 per cent. Production of crude steel grew by 8.9 per cent to 88. 98 MT. Total finished steel production for sale increased by 5.1 per cent to 92.16 MT. Consumption of total finished steel increased 3.9 per cent to 76.99 MT.

India produced 7.34 MT of steel in the month of September 2015, which was nearly equal to the country's steel production in September 2014.

The steel sector in India contributes nearly two per cent of the country’s gross domestic product (GDP) and employs over 600,000 people. The per capita consumption of total finished steel in the country has risen from 51 Kg in 2009-10 to about 59 Kg in 2014-15. India's steel consumption for FY 2015-16 is estimated to increase by 7 per cent, higher than 2 per cent growth last year, due to improving economic activity, as per E&Y's 'Global Steel 2015-16' report.

Historical Returns:

Let us first look on the returns of this sector in Indian share market

FINANCIAL YEAR | RETURN (BSE METAL) |

FY16 | -20.34% |

FY15 | -5.90% |

FY14 | 14.85% |

Reason for correction in metal sector: China’s stock market plunge 

Analysis of impact through facts

China accounts for more than 30% of the overall consumption of metals globally |

Export demand may also fall given that China will dump its surplus production in various markets |

Most Indian steel and base metal manufacturers invested heavily on expanding capacity in china |

Among the bigger steel companies, Tata Steel Ltd has a debt of Rs.69, 303.88 crore, JSW Steel has a debt of Rs.38, 720.28 crore and Jindal Steel and Power Ltd has a debt ofRs.42, 251.91 crore. Among base metal producers, Hindalco has a debt ofRs.67, 058.16 crore, while Vedanta has loans of Rs.77, 752.30 crore. |

The above...