Metal stocks under pressure for the second day in a row - Check reasons what leading to low consumption

The metal stocks reeling under pressure lately on multiple fronts from weak demand from the construction due to monsoon to auto companies facing semi-conductor issue. The metal index was the biggest laggard, down over 2 per cent today dragging most of the benchmark indices.

In its report, CARE ratings lists out the reason, why the steel demand is weak and how multiple factors are dominating the sector. It said, “The demand for steel generally slows down during the monsoon season due to slowdown in construction activities, which is the largest user industry accounting for 70 per cent of the total demand.”

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The report further adds, “This year the demand has been doubly impacted due to slowdown in auto production as well, caused by the global semi-conductor shortages.”

Earlier this week, the metal index reported a bloodbath with the heavyweight such as Tata Steel declining more than 10 per cent on Monday amid Chinese real estate giant Evergrande crisis. The stock has been most volatile this week than other peers, as on Friday it closed around 4 per cent.

As many as 14 stocks of 15 in the Nifty Metal index declined during today’s trade, with steel majors such as Tata Steel and JSW Steel (down over 3 per cent) leading the fall, similarly, Nalco joined the declining party to close over 3 per cent lower during Friday’s trade.

Despite higher production, the consumption of finished steel has been lower than that registered by steel companies in August 2021as compared to the preceding two years that is August 2019 and August 2020 by 1 per cent and 14 per cent, respectively, the CARE ratings said in its report.

Moreover, “Demand from the overseas market remained weak due to exhausted quotas for India in the European Union and speculations over China’s steel export tax policy,” the rating agency said.