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    NMDC, Hindalco, SAIL, Tata Steel fall as commodity prices hit fresh lows with looming recession fear

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    NMDC, Hindalco, SAIL, Tata Steel fall as commodity prices hit fresh lows with looming recession fear


    Tata Steel, JSW Steel, Jindal Steel & Power and SAIL shares jumped after sources said a decision is yet to be taken on the exemption of export duty for certain steel products.

    Shares of metal companies were trading below the flatline on Tuesday as commodity prices hit new lows on concerns over slowing Chinese consumption and a US recession.
    Commodity LowOff from highs
    Silver23 month lowNil
    Copper17 month low-29%
    Steel16 month low-20%
    Aluminium12 month low41%
    Zinc10 month low-31%
    Iron OreNil30%
    (Source: Research Desk)
    Today, shares such as Hindalco Industries, NALCO, Steel Authority of India, Hindustan Copper, Tata Steel, JSW Steel, Jindal Steel and Power, Hindustan Zinc and NMDC fell 1-5 percent.
    Investors will keenly observe the US inflation data, due on Wednesday, for clarity on the outlook for metal companies.
    At a time like this, global brokerage firm Citi believes the next big downswing in metals will be driven by the recession scenario, most notably in Europe. Further, it added that without proper stimulus measure, commodity prices are expected to decline.
    Jatin Damania, Vice President-Fundamental Research, Kotak Securities, said that EBITDA per tonne will decline sequentially due to higher coking coal cost and fall in volume led by lower exports. Additionally, for ferrous companies, he expects average increase in steel realization of Rs 2,500-3,000 per tonne on a QoQ basis, which will be offset by lower exports. prices impacted by imposition of export duties.
    For non-ferrous metals, Damania pointed out that zinc prices have risen 5 percent QoQ to $3,917 per tonne, aluminum prices have fallen 12 percent QoQ to $2,890 per tonne and alumina prices have declined 10 percent sequentially to $380 per tonne. Lower volume due to higher commodity prices would also hurt margins, he added.
    On Monday, after sources said that the government is considering a proposal to discontinue a 15 percent export duty on certain steel products, steel stocks such as Tata Steel, JSW Steel and SAIL rose.
    Tata Steel, JSW Steel, JSPL and Steel Authority of India Ltd (SAIL) jumped around 3-5 percent in afternoon deals.
    The government will consider the industry's proposal to discontinue the 15 duty on exports of certain products before the end of the monsoon season, sources told CNBC-TV18.
    A decision is yet to be taken on the exemption of export duty for steel, they added.
    The Finance Minister had recently assured industry leaders, following a meeting with Tata Steel, SAIL, JSW Steel, JSPL and ArcelorMittal, that the government will relook on the duty on certain products.
    Major steelmakers have lost market capitalisation as margins were under pressure amid slow domestic demand and high export duties resulting in a loss of overseas customers.
    In a bid to tackle soaring inflation, the government had imposed 15 percent export duty on steel on May 22 which had sent steel stocks into a downward spiral and triggered earnings downgrades for the sector.
    Despite the uptrend in share price of steelmakers, it is “too premature and early for the govt to relook at the export duty,” Rakesh Arora, Founder of goindiastocks.com, told CNBCTV18.
    “I don't see any case for export taxes to be revoked… even if the export duty is removed, which is highly unlikely, the impact on domestic prices is likely to be like negligible. In fact, today, the import parity price is Rs 2,000-3,000 per tonne lower than the domestic price. So, even if you reduce the export duty to zero, domestic prices will still have to fall because imports can come in, given that global prices are much lower,” Arora added.
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