The latest sector update by JM Financial highlighted that shifting dynamics in the metals sector are expected to sequentially improve margins for ferrous players such as Tata Steel Ltd and Jindal Steel Ltd (JSPL) in the fourth quarter.
“Average domestic HRC price has increased QoQ materially by ~Rs 5.9k/t with spot at ~Rs 56k/t currently while average rebar price has spiked QoQ by ~Rs 9.5k/t to ~Rs 60k/t currently, enabling mills to pass through higher prices during 4Q dispatches,” JM Financial said.
The brokerage has assigned a ‘Buy’ recommendation to a broad basket of stocks, including Tata Steel, JSW Steel Ltd, Jindal Steel, Shyam Metalics and Energy Ltd, Welspun Corp Ltd, Hindalco Industries, Hindustan Zinc Ltd, Kirloskar Ferrous Ltd, Lloyds Metals and Energy Ltd, and Jindal Stainless Ltd.
“JSPL (low leverage, high volume growth over next few years) and Tata Steel (CBAM leading to higher prices inEurope, aiding Corus margins) remain our top picks in the space,” the brokerage said.
Meanwhile, the brokerage has issued a ‘Sell’ call on SAIL and a ‘Reduce’ rating for NMDC.
JM Financial said “EBITDA/t would expand to the tune of INR4.5k/t+” in the fourth quarter of the financial year 2026. However, it noted that steelmakers are facing persistent cost pressures, primarily driven by raw materials. Companies have guided for a sequential uptick of $15 to $20 per tonne in coking coal consumption costs.
This geopolitical risk amid the US-Israel-Iran conflict has fuelled a sharp rally, with London Metal Exchange (LME) aluminium prices jumping to around $3,429 per tonne amid tightening supply expectations, it said.
“While higher aluminium prices support near-term margins for producers such as Hindalco, persistently elevated prices could eventually weigh on demand,” the brokerage said.
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