Home / Markets / Stock Markets /  Why this metal stock is Edelweiss' sole 'Buy' tag in the sector

Brokerage and research firm Edelweiss believes that demand recovery remains key in the steel industry. Rebar and HRC prices have stayed low MoM despite government’s vows of pursuing growth. Besides, high steel and Al exports are likely to keep the global prices of these commodities constrained. 

The brokerage said it remains cautious on the ferrous space with Shyam Metalics (target price of 353) as the sole ‘Buy’ in the metals sector. The metal stock is down more than 22% since its listing in June last year.

“China reported record trade surplus mainly on pent-up export shipments. Key points: Refined copper imports jumped 9% YoY on favourable SHFE-LME arbitrage, Iron-ore imports rose 3% YoY to 91mt as traders weighed possible demand improvement for rebars from the government’s infrastructure-targeted stimulus measures, Al exports remains firm, steel exports stayed elevated despite subdued demand from Vietnam and other regions in southeast Asia," the note highlighted. 

The brokerage house said it expects the pent-up portion of exports slacken as demand outlook in rest of the world grows murkier. It remains circumspect of the ferrous space owing to the twin-trouble of higher export volume and lower prices from China.

“China’s surprisingly strong trade data stands against the backdrop of robust production (particularly of Al) and declining consumption, stemming from the stringent zero-tolerance covid-19 policy. We expect exports to decline as demand in the rest of the world continues to remain shy," it added.

That said, robust steel (despite declining production) and Al exports are a cause of concern. While regional steel prices are already at its lowest level since Nov-20, LME Al price has also remained range-bound, as ~10% of global Al demand is being met by exports from China, as per Edelweiss.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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