Indian Metal Stocks Plunge Amid Escalating Trade Tensions

The Indian stock market faced significant turmoil as domestic metal stocks took a heavy hit for the second consecutive session on April 7. The ongoing trade dispute between the United States and China has raised alarm bells regarding the demand for raw materials, leading to a steep decline in the Nifty Metal index. After a staggering drop of 6.56% in the previous session, the index fell another 8.60%, hitting a new 52-week low of 7,690 points.

Major Players Hit Hard

Out of the 15 companies listed in the Nifty Metal index, eight reached their respective 52-week lows. This includes prominent players like NALCO, Adani Enterprises, and Tata Steel. Specifically, Lloyds Metals & Energy led the downward trend, plummeting more than 13% by 2:30 PM. Other significant declines were seen in NALCO and JSW Steel, both down over 8%.

• Key Stock Drops:
  • Lloyds Metals & Energy: -13%
  • NALCO: -8%
  • JSW Steel: -8%

Trade War Fallout

The intensifying trade war has been further exacerbated by China’s retaliatory tariffs against the U.S. In reaction to President Donald Trump’s imposition of 34% tariffs, China has swiftly matched these tariffs on American goods, stirring fears about decreasing demand for essential metals like copper and zinc. The two nations collectively contribute to 45% of the global GDP, making their economic health crucial for metal markets.

• China’s Action Plan:
  • Tariffs effective from April 10
  • Filing a complaint at the World Trade Organization
  • Restrictions on rare earth exports

Global Market Reactions

Trump took to social media, suggesting that China’s actions were a miscalculation, stating, “China played it wrong.” This tit-for-tat strategy has raised concerns about other countries possibly following suit, especially after the U.S. recently imposed tariffs on 180 countries. With the new 34% tariffs, the total U.S. tariff rate on Chinese imports has skyrocketed to 54%, a significant escalation from earlier proposals of 60%.

Broader Economic Implications

In light of the rising trade barriers, countries like Canada are reportedly preparing their own countermeasures. The ramifications are being felt across global financial markets, with financial institutions bracing for further volatility as tariffs reach their highest levels in over a century.

As part of this growing tension, Trump’s most extensive tariffs took effect recently, impacting around 60 trading partners, including major economies like the European Union and Japan. The looming threat of tariffs on semiconductors has also rattled markets, particularly in Taiwan, a key player in chip manufacturing.

What Lies Ahead for Metals and Mining Sector?

Looking ahead, analysts at Axis Securities anticipate that companies in the steel sector, such as Tata Steel and SAIL, may see sequential EBITDA growth of 6% and 35%, respectively, in Q4FY25. This growth is attributed to increased sales volumes and lower coking coal prices, even as steel price realizations face slight declines.

• Predicted Performance:
  • Tata Steel: 6% growth
  • SAIL: 35% growth
  • Hindalco and NALCO: Positive YoY growth in EBITDA, despite some margin pressures

For structural steel manufacturers, companies like APL Apollo are expected to achieve record sales and profitability as construction activities ramp up. However, JTL continues to struggle with low volumes, projecting a potential decline in earnings.

Conclusion

As the trade conflict between the U.S. and China escalates, the outlook for the Indian metal sector remains uncertain. Stakeholders are keenly watching developments to gauge how these dynamics will influence market trends in the coming months.

For further insights on market trends, check out our related articles on the impact of tariffs on global trade and the future of the metals industry.