While Russia is the second largest producer of crude globally, it also dominates the trade of metals like steel, aluminum, nickel.
Metals on Fire: The ongoing war between Russia and Ukraine seems to be dragging on. Due to this, all the big countries of the world are imposing economic sanctions on Russia. Due to this, apart from crude and commodities, there is an increase in the prices of metals. Recently, there has been an increase in the prices of many types of metals. At the same time, due to supply chain disturbance, demand has also started increasing. Brokerage house Motilal Oswal believes that if this crisis continues for a long time, then the metal prices will go further. On the other hand, depending on the supply from Russia, the Indian companies that export metal can prove to be winners. The brokerage estimates that the shares of Coal India, Tata Steel, Hindalco and NACL may outperform in the coming days.
Mass metal production in Russia
According to the report, while Russia is the second largest producer of crude globally, it is the fourth largest producer of steel in the world. In the case of steel, it has a strong competition with Japan and India. At the same time, the figures of the year 2020 show that Russia is the third largest producer of aluminum in the world. Russia also ranks third in nickel production. In such a situation, due to the sanctions imposed on Russia due to Ukraine Crisis, the prices of aluminum, nickel, steel, thermal coal and PCI coal are bound to increase.
Russia dominates metal trade
Talking about global trade, Russia accounts for 9 to 10 percent of the world markets in aluminum exports. At the same time, in the case of exporting nickel, there is a global share of 11 to 12 percent. Russia’s share in thermal coal exports is 20 percent. Whereas Russia has a 12 percent share in the global markets in the steel trade.
EBITDA Estimates Raised
Brokerage house Motilal Oswal says that the rise in prices will increase the profits of metal companies. The brokerage house has raised the EBITDA estimates of some companies for FY23. These include COAL (+34%), NACL (+29%), VED (+13%), HNDL (+9%), HZ (+6%) and TATA (+10%).
Top Picks
Hindalco, NACL, Coal India, TATA Steel
The brokerage house says that India is an exporter of aluminum. In such a situation, HNDL, NACL and VED will benefit from the increase in prices. At the same time, COAL will get the benefit of increasing demand for coal. Whereas TATA will benefit from the increase in steel prices.
(Disclaimer: Stock investment advice is given by the brokerage house. These are not the personal views of The Financial Express. Markets are risky, so take expert opinion before investing.)
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