Metal shares gain as Trump signs phase one trade deal with China

Metal stocks, led by Vedanta and Tata Steel, gained in Friday's trade on the NSE after US President Donald Trump approved trade deal with China to halt December 15 tariffs.

At 10:10 am, Nifty Metal index was the top gainer among Nifty sectoral indices and was trading 2.24 per cent higher as compared to 0.57 per cent gain in the benchmark Nifty50 index.

According to a Bloomberg report, President Donald Trump signed off on a phase-one trade deal with China, averting the December 15 introduction of a new wave of US tariffs on about $160 billion of consumer goods from the Asian nation. READ MORE

Earlier, Trump had tweeted that the U.S. and China are “VERY close” to signing a “BIG” trade deal, also sending equities higher. 

Individually, Hindustan Copper Limited climbed 4.8 per cent, followed by Vedanta Limited (4.37 per cent), Tata Steel (3.8 per cent), SAIL (3.6 per cent), Jindal Steel (3.4 per cent), and National Aluminium Company Limited (3.2 per cent). Besides, shares of Coal India and NMDC gained in the range of 2 to 3 per cent. 

The continued tariff/trade wars have affected the base metals industry during the whole of FY19, and in the current financial year, it has continued to depress the prices of base metals resulting in affecting the revenues and margins of non-ferrous manufacturers.

Any progress in the US-China trade deal would come in as a huge relief for metal stocks which have been under pressure ever since the global trade war between the two countries began. Consequently, steel companies have witnessed contraction in margins, dragged down by lacklustre demand and lower global commodity prices.

In September quarter, lower commodity prices, fragile demand and slowing volumes throttled the performance of metal sector companies. For steel firms, heavy monsoon, liquidity issues and weakness in automobile sector further led to a slump in demand. All steel companies faced sagging volumes in the quarter, but they expect a recovery in the second half or the October-March period of FY20.

Margins of top steel firms- Tata Steel, JSW Steel, Jindal Steel & Power Ltd (JSPL) and SAIL contracted by Rs 1,200-2,400 per tonne in Q2. The margin squeeze was the most pronounced for JSW Steel. Ebitda for Tata Steel Europe remained weak at $10 per tonne due to a fall in steel spreads, weak demand and planned summer shutdowns.