Shares of metal companies are under pressure for the second straight day. Nifty Metal index has hit 17-month low on Thursday, amid fears of global slowdown.
At 09:30 am, Nifty Metal index, the largest loser among sectoral indices, was down 2.5% at 3,042, its lowest level since July 10, 2017, on National Stock Exchange (NSE). In the last two trading sessions, the metal index has dipped 6%, as compared to a 2% decline in the Nifty 50 index.
Vedanta, Steel Authority of India (SAIL), NMDC and Jindal Steel & Power (JSPL) from the Nifty Metal index have hit their respective 52-week lows today, while Tata Steel and Hindustan Zinc are trading close to 52-week low on the NSE.
The steel prices witnessed temporary weakness in the last two weeks due to demand disruption on account of Assembly Elections in four major states i.e. Chhattisgarh, Madhya Pradesh, Telangana, and Rajasthan. A slowdown in China's domestic steel demand also impacted the prices, Prakash Industries said in a press release last week.
However, presently, steel prices have started to improve and raw material prices (iron ore and coal) have come down, thereby securing the profitability of the company, it added.
According to Moody's Investors Service, in 2019, demand for steel in Asia is likely to stay at levels similar to that in 2018, indicating a softening from the robust growth seen in 2018.
Moody's explains that the steel industry in China drives the outlook for the sector in Asia because China is by far the region's largest steel customer and producer.
"Our forecast of flat steel demand in China for 2019 reflects higher infrastructure spending that will limit the negative effects of the ongoing Sino-US trade dispute and slower growth in China's real-estate investments," says Kai Hu, a Moody's Senior Vice President.
Moody's also points out that the escalation of the Sino-US trade dispute will have a limited effect on Asian steel demand, given the moderate indirect impact through supply chains and manageable direct macro impact. However, the spillover effects could be greater and potential US tariffs on imported vehicles pose key downside risks to Japanese and Korean steelmakers, it added.