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Metals and Mining: Sector Outlook
Indian metals and mining companies are in a sweet spot right now. With increases in
commodity prices across the globe, strong demand and constrained supply in India, they are
set to reap the benefits of increasing earnings. We would increase exposure to companies
that have implemented new projects, lock in resources and will see earnings growth.
Demand growth to remain strong: India’s growth story remains intact, with GDP
forecasts at 8.5% for the next two years, which would support demand for metals for the
next few years. Also, India’s per capita consumption of all the metals is much below
those of developed countries, giving a considerable opportunity to grow.
Supply constrained and tightening further: Setting up new capacities is becoming
increasingly difficult, with projects facing delays due to long approval processes and
difficulty in land acquisition. India has become a net importer of steel as well as thermal
coal due to the slow increase in capacity. Lately, another constraint, logistics, has been
making it difficult for companies like Coal India and NMDC to meet their production targets.
Lowest-cost producers: Indian base metal companies are at the low end of the cost
curve and are highly profitable. They have been able to reap the advantage of being
nearer to market, low labour costs and free allocation of resources by government so far.
Prefer exposure in integrated companies: Getting access to resources is becoming
increasingly difficult, with multiple layers of regulatory approvals required from the Ministry
of Environment and Forests. We like integrated companies which have been able to make
progress in setting up capacities. Top picks – JSP IN, TATA IN and GNC IN
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Metals and Mining: Sector Outlook
Indian metals and mining companies are in a sweet spot right now. With increases in
commodity prices across the globe, strong demand and constrained supply in India, they are
set to reap the benefits of increasing earnings. We would increase exposure to companies
that have implemented new projects, lock in resources and will see earnings growth.
Demand growth to remain strong: India’s growth story remains intact, with GDP
forecasts at 8.5% for the next two years, which would support demand for metals for the
next few years. Also, India’s per capita consumption of all the metals is much below
those of developed countries, giving a considerable opportunity to grow.
Supply constrained and tightening further: Setting up new capacities is becoming
increasingly difficult, with projects facing delays due to long approval processes and
difficulty in land acquisition. India has become a net importer of steel as well as thermal
coal due to the slow increase in capacity. Lately, another constraint, logistics, has been
making it difficult for companies like Coal India and NMDC to meet their production targets.
Lowest-cost producers: Indian base metal companies are at the low end of the cost
curve and are highly profitable. They have been able to reap the advantage of being
nearer to market, low labour costs and free allocation of resources by government so far.
Prefer exposure in integrated companies: Getting access to resources is becoming
increasingly difficult, with multiple layers of regulatory approvals required from the Ministry
of Environment and Forests. We like integrated companies which have been able to make
progress in setting up capacities. Top picks – JSP IN, TATA IN and GNC IN
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