Metal stocks witnessed a significant surge in trading on April 1 following encouraging economic data from China indicating a rebound in the manufacturing sector, potentially leading to increased demand for metals.
China’s manufacturing activity expanded for the first time in six months, growing at the fastest pace in 13 months. The manufacturing purchasing managers index rose to 50.8 in March from 49.1 in February, signaling stabilization in the world’s second-largest economy.
Indian metal stocks experienced a strong upswing, with the Nifty metal index jumping 3.4 percent to reach a new high. Among its constituents, Hindustan Copper, Welspun Corp, and Vedanta emerged as the top gainers, with gains of up to 8 percent.
According to Vinit Bolinjkar of Ventura Securities, apart from the positive manufacturing update from China, the commodities sector is entering a structural bull cycle expected to last eight to 10 years.
The last commodity supercycle occurred in the mid-2000s, driven by reforms in China, leading to significant price increases in iron ore, steel, coal, and natural gas.
Another factor contributing to the rise in metal prices is the global push for infrastructure development and increased defense spending, driving up demand for metals. As demand for metals such as copper, zinc, and lead rises, supply constraints are causing prices to soar.
Motilal Oswal stated that domestic demand for iron ore is expected to align with infrastructure and construction growth, with the domestic steel sector well-positioned compared to global peers. As crude steel capacity reaches 300 million tonnes by FY30-31, the total demand for iron ore is projected to be around 435-445 million tonnes.
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