Global risk has overshadowed the metals across the globe and off late has been impacted by the trade sanctions on Turkey. And after subsiding for some time, Turkish lira again plunged in light of the fresh sanctions on Turkey as the previous week ended. Also, the US-China trade threat and sanctions on Russia are unknown of any decisive fate.
So, by and large external factors which are affecting the industry hugely are not seeing conditions to calm down anytime soon.
Two factors to become playful side by side
Producers of metal to feel the heat in light of decline in metal prices
While prices of metals will be hurted or see a downward trajectory, to the same extent companies will see their earnings to fall and hence investors will lower down their expectations from the metal scrip. The affect will gradually be seen in the valuation of these metal scrips. And as the global tensions will affect the global economy at large, pressure will remain longer.
Rupee depreciation will also augur well for producers but at the sometime import of raw material will become expensive
So, when at one place producers will benefit from the free-falling rupee currency, the imports in respect of the production of these metals will be borne heavily due to expensive imports of raw material such as coal etc.
Some of the metal companies that are seeing the heat currently include Hindustan Zinc Ltd as prices of zinc has fallen by huge amounts during the ongoing month itself and the repercussions are to fall on Vedanta who is still recovering from several of the latest headwinds.
Other metals that have seen prices crashing down during the month include copper and aluminium as per the Bloomberg report.
however as dollar has slipped, metal prices in the world markets have zoomed.
For investors, it is advised to remain cautious on the sector and be vigilant to the global landscape in terms of the economic data to be released by the Chinese government and the US-China talks currently underway in the Washington as it shall be indicative of the rout being of a short-term or of a deep-rooted nature.