National Aluminium, Hindustan Copper, others drag Nifty Metal down 2% amid global commodity price pullback

Metal stocks like National Aluminium, Hindustan Copper, and Hindustan Zinc, among others, dragged the sectoral index down nearly 2% during the trading session on Friday, August 14, as investors focused on the pullback in global commodity prices of key minerals like copper, zinc, and aluminium.

NSE data showed that the sectoral benchmark index, Nifty Metal, declined 1.7% to touch its intraday low of 12,812.90 points during Friday’s market, in comparison to 13,033.75 points at the previous equity market close.

After the day’s low level, the Nifty Metal index recovered some of its morning market losses, trading 0.96% lower at 12,909 points during the afternoon market hours, as per the exchange data.

Why are metal stocks falling today?

Metal and mining stocks like National Aluminium, Hindustan Copper, Hindustan Zinc, Hindalco, NMDC, and Tata Steel were among others dragging down the benchmark sectoral index after global metal prices recorded a pullback amid easing supply concerns.

A drop in several metal prices in the global market is a negative move for metal mining companies, which enjoy margin benefits directly due to elevated commodity prices in the market.

At higher prices, these companies are able to sell their produced goods or minerals at an elevated rate, which in turn aids the overall revenue growth in a particular period under review.

Market experts predict that there is potential that commodity prices like that of copper, aluminium and zinc, among others, are expected to stabilise at a higher price or pull back to lower levels depending on the supply-side issues easing in the market.

On Friday, August 14, aluminium supply concerns eased after the Brazilian regulator allowed the Norwegian energy and aluminium firm Norsk Hydro to self-import gas and have terminal access, which will allow the company to boost its production back to full capacity.

The company also said that alumina (a key element needed for aluminium production) production at the company’s Alunorte refinery is currently being ramped up to full capacity.

“With the agreement in place, alumina production at Alunorte is being ramped up to full capacity. Lost production during the period of reduced alumina production is estimated to be 100,000 to 120,000 tonnes,” as per the official release.

This move served as a trigger for the decline in aluminium prices in the global market on Friday. With easing concerns in the market, prices were also witnessing a pullback as traders placed their bets based on an improved supply outlook for the upcoming period.

Metal stocks in focus today

How much have metal prices dropped today?

Investing.com data showed that global Aluminium prices declined 0.6% to an intraday low of $3,222.50 per 25 tonnes, in comparison to $3,241.5 per 25 tonnes in the previous commodity market close.

The data further showed that aluminium prices have dropped 11% in the last three months, and over 1.1% in the last five trading sessions.

Copper prices in the global market declined 0.8% to their intraday low of $6.5545 per 25,000 pounds, in comparison to $6.608 per 25,000 pounds in previous market close levels, as per the exchange data.

Copper, a key mineral for the electricity, cables, and wires sector, has been witnessing strong demand from the domestic market even at higher price levels, while the rates have been trading more than 13% higher in the last six months.

In the case of Zinc, global prices dropped 0.5% to $3,718 per 25 metric tonnes, compared to $3,737.45 per 25 metric tonnes in the previous market close. The demand for zinc has strong momentum, as it is a key mineral used for industrial manufacturing, pharmaceuticals, and the corrosion prevention industry.

Investing.com data showed that Zinc prices in the global market have risen 1.5% in one week, over 4% in a month, and over 12% in the last six months.

Has Nifty Metal outperformed NIFTY50?

Although Nifty Metal has outperformed the benchmark NIFTY50 index over a longer period of time, on a three-month basis, the performance declined due to commodity price volatility impacting the stocks in the market.

Nifty Metal has lost 4.7% in the last three months, while the broader benchmark index gained 2.75% in the same period.

The metals index has significantly underperformed in comparison to the NIFTY50 in the last five market sessions, declining over 2%, while the broader index was down almost 1%, as per the exchange data.

In the longer term, Nifty Metal has delivered more than 122% returns to investors in five years, over 97% gains in the last three years, and around 40% returns on their investments in the past one-year period, as per NSE data.

While the NIFTY50 has risen 47% in the last five years, 25% in the last three years, and is down 1.1% in the last one-year period.

On a YTD basis, Nifty Metal has risen nearly 15%, while the NIFTY50 was down 7%.