Metal stocks surge in trade — Here are key factors behind the upmove

The Nifty Metal index is among the top sectoral gainer in Wednesday's trading session with stocks seeing a surge of up to 4%. Nearly every constituent on the index is trading with gains.

What's Aiding The Gains?

There are two major drivers: expectations of Fed rate cuts have moved up in comparison to last week and fresh commentary from the Steel Secretary who spoke exclusively to CNBCTV18.

Steel Secretary To CNBC-TV18

The provisional safeguard duty expired on November 6, which means there is currently no safeguard duty in place. However, the secretary said a government decision on reinstating the safeguard duty is expected soon. He added that adjustments in BIS norms and quality controls are aimed at balancing the interests of both steel producers and consumers.

Why Is A Safeguard Duty Important?

China’s Output may be Down, but exports are still high, continuing at 10 MT per month, which is a worry. Elevated exports means more Chinese steel in global markets, pressuring prices.

Domestic Prices are now at par with imported steel, but if safeguard duty is imposed then it makes domestic steel more competitive as it will make domestic steel price 12% cheaper than China and 8% - 9% cheaper than imports from Japan & Korea. A safeguard duty would protect margins and support domestic pricing at a time when global steel remains cheap.

Additionally, large new steel capacities are coming online in India which could create higher supply in the near-term. Export opportunities could be narrowing especially with the EUs carbon Border Adjustment Mechanism (CBAM) which will increase compliance costs and reduce competitiveness in Europe. This adds pressure on the industry to ensure the domestic market remains viable, strengthening the case for safeguard duties.

India's Steel Secretary also expects demand to grow between 8% to 10% going forward and steel prices which are expected to stabilize in 2026.

Shares of Lloyds Metals, JSW Steel, and SAIL are trading with gains between 3% to 4%, followed by those of Hindustan Copper and Jindal Stainless, which are trading 2% to 3% higher.