Five stocks are riding the rally in metals. Do you have any?
The increase was widespread – copper increased by more than 80%, iron ore by more than 100%, and nickel by more than 40%. Against the backdrop of rising prices, metal inventories have experienced a phenomenal run over the past year and continue to soar.
Here are the top 5 stocks that top the rally in the metal.
SAIL shares have risen almost 300% in the past year.
As the country’s largest steel producer, the company has benefited from soaring steel prices, strong demand from various sectors, and the government’s focus on infrastructure.
As a result, the company recorded its best production and sales performance in fiscal year 2021.
It also deleveraged its balance sheet. In line with its goal of reducing borrowing, the company reduced its net debt from Rs 161.3 billion in 2020 to Rs 153.5 billion in 2021.
SAIL continues to reap the benefits of rising steel prices, despite the impact of the wage review.
With steel prices at an all time high, the company is poised to post its best EBITDA / tonne of 20,000 rupees in the June 2021 quarter.
Tata Steel shares have risen 240% in the past year due to rising steel prices.
Like SAIL, Tata Steel has also deleveraged its balance sheet. The company paid off Rs 300 billion of its net debt in the past fiscal year.
In its latest quarterly results, the company reported better-than-expected figures thanks to improved domestic market achievements.
Looking ahead, a bullish global economic outlook and reduced supplies from China could push steel prices higher.
In this context, Tata Steel would be the main beneficiary through its integrated operations.
Taking advantage of strong copper prices, shares of Hindustan Copper (HCL) have jumped 330% in the past year.
HCL is the only vertically integrated copper producer in India engaged in a wide range of activities ranging from mining, beneficiation, smelting and refining.
The company expects copper concentrate, not refined copper products, to be its primary product in the future.
It is also in the process of expanding its mining capacities from around 3.9 million tonnes per year (MTPA) as of March 31, 2020 to 20.2 MTPA.
Trafigura Group, the world’s largest copper trader, and Goldman Sachs have both said copper prices could reach $ 15,000 per tonne in the coming years. Bank of America said $ 20,000 could also be possible if drastic problems arise on the supply side.
NALCO shares have risen more than 140% in the past year, as rising aluminum prices continued to boost the company’s profits throughout the year.
Profit was also supported by revenues from the alumina segment.
The company reported nine-fold net profit in the March 2021 quarter.
The company’s aluminum segment revenue jumped 19% sequentially and 72% year-on-year to reach ₹19.4 billion. Aluminum production volumes at 112,000 tonnes increased 10% year-on-year.
Aluminum prices on the London Metal Exchange (LME) averaged $ 2,093 / tonne during the quarter, up sharply from $ 1,694 / tonne a year ago.
In the future, the favorable development of aluminum prices should continue to boost the performance of the company.
Vedanta shares have grown by over 140% in the past year thanks to improved operational performance, supported by stable volumes across all lines of business and high commodity prices.
The mining conglomerate is the only listed Indian company that offers exposure to multiple commodities at once, including zinc, aluminum, lead, silver, copper, iron ore, steel and petroleum. gross.
In addition, Vedanta also owns around 65% of the capital of Hindustan Zinc.
A sharp rise in Vedanta’s share price allowed the company to regain the ₹1,000 billion market capitalization.
With expected volume growth across all businesses, sustained cost savings and healthy raw material prices, Vedanta’s earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to improve to over 350 billion. Rupees in 2022.
As you can see, metal stocks have been on fire this year.
Brijesh Bhatia, Senior Research Analyst at Equitymaster, called it the sector of the year at the start of 2021.
Brijesh is bullish in the sector. He believes metals stocks are ready to start the next stage in their rally.
Watch this video to learn more.
How long will the metals rally last?
Soaring metal prices have sparked a debate over whether the world is entering a commodity cycle or a “supercycle,” a prolonged phase of abnormally high prices that lasts for at least a decade.
Yes, there is a green industrial revolution on the horizon, which will increase the demand for certain raw materials.
However, this does not apply to all metals.
Commodity prices have rebounded from artificially low levels they hit in the first wave of the pandemic last year.
Lockdowns across the world have created bottlenecks and disrupted mining operations, creating a shortage and driving up prices.
This obviously has nothing to do with a supercycle.
In addition, the weaker US dollar has had an impact on commodity prices. When the dollar depreciates, producers in other countries must increase their prices so that their local currency income does not fall.
As the world’s largest buyer of a range of industrial products, China is already using its market weight to curb the sharp rise in global metal prices over the past 12 months.
This can slow down the rally.
China’s latest move targets copper, aluminum and zinc, among other metals. He has already outlined a program of public auctions to domestic processors and manufacturers of metals.
Metal prices have already started to decline in recent weeks, amid market sentiment that global supply levels did not warrant such rebounds.
It remains to be seen how this will turn out for metal stocks. In the meantime, stay tuned for more updates from this space.
(This article is syndicated from Equitymaster.com)
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