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Indian metal and mining companies are emerging as a bright spot in a global market that is struggling with stagnant commodity volumes, according to a report by Jefferies.
The report highlighted India's robust steel production growth of 22 per cent between 2019 and 2023, in stark contrast to the 1 per cent decline globally during the same period. It said "Indian metal & mining firms offer a bright spot in the world largely devoid of volume growth in commodities". The report predicts strong earnings growth for Indian steel companies over FY25-27, driven by rising volumes and improved conversion spreads. Aluminium and alumina prices are also on the rise, coupled with effective cost control in Indian operations. The report remained optimistic about India's metal sector, with demand for steel and aluminium expected to rise as supply-demand balances improve. Globally, Jefferies' metals team anticipated that the gradual recovery in commodity demand in the US and China in 2025, could provide further support to prices. In the US, favourable factors such as lower corporate tax rates, reduced regulatory burdens, lower interest rates, and manageable inflation are expected to drive increased fixed asset investment (FAI) in metal-intensive projects and manufacturing. Meanwhile, in China, demand is likely to benefit from the rollout of accommodative policies, with additional fiscal and monetary support potentially boosting the market further. It said "JEF global metals team expects demand in US and China to gradually improve in 2025, which should support commodity prices. Conversion spreads in steel and aluminium are below long-term averages, and should expand if demand supply balances improve". The report also noted that India's steel demand is already showing significant growth, with a 14 per cent year-on-year increase from April to November 2024. This demand is expected to gain further momentum in 2025, supported by increased government spending on infrastructure and development projects. The report also highlighted India's rising power demand as a key driver for coal volumes, which grew 1 per cent year-on-year during the first nine months of FY25. Jefferies forecasts a healthy 5 per cent compound annual growth rate (CAGR) in coal demand between FY25 and FY27. Despite global macroeconomic and geopolitical risks, India's metal and mining sector remains resilient, with improving domestic demand and constrained global supply expected to support commodity prices in 2025. (ANI)
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