NIFTY Metal Index Plunges 7% Following Last Week's Similar Decline as Trade War Intensifies
The global markets are experiencing significant turbulence as escalating trade tensions continue to batter metal stocks. The NIFTY Metal index has crashed another 7% today, April 7, 2025, following an equally severe 7.37% decline last week. This double-digit drop within a short period has raised concerns among investors about the sector's near-term prospects.
Current Market Scenario
In today's trading session, all 15 constituents of the NIFTY Metal index were trading in negative territory. The index was down 7.18% at 7,810.45 levels during opening deals. Among the major players, Tata Steel witnessed a dramatic fall of 10%, trading at ₹126.35, while Vedanta declined by nearly 7% to ₹374.30. Another significant loser was Lloyds Metals and Energy, which dropped 7.83% to 1,140.30 levels.
The severe correction in metal stocks comes amid heightened economic uncertainties triggered by the escalating global trade war initiated by US President Donald Trump's administration.
Trade War Escalation
The trade tensions have intensified as China responded on Friday with a 34% additional tariff on US imports, directly countering President Trump's similar levy on Chinese goods. Beijing has also announced export controls on certain rare earth metals, strategically targeting American defense, computer, and smartphone industries.
According to the Chinese Customs Tariff Commission of the State Council, these retaliatory tariffs on all US-imported products will come into effect from April 10, 2025.
Former World Bank Chief Economist Kaushik Basu has described the reciprocal tariffs imposed by the Trump administration on approximately 60 countries as "baffling." Basu noted that while these measures will have some adverse effects on India, the major negative impact will be felt within the US economy itself.
Domestic Growth Despite Global Headwinds
Despite the global trade tensions, Indian metal companies are reportedly preparing for significant expansions in the current fiscal year, focusing primarily on the growing domestic demand.
Industry analysts suggest that companies with strong domestic focus such as Vedanta, JSW Steel, Hindustan Zinc, and NALCO are positioning themselves to capitalize on:
- India's robust domestic demand growth
- The global race for critical minerals
- Strategic geographic diversification
Domestic steel demand is projected to grow at an impressive 10% annually over the next few years, with overall demand expected to increase at a CAGR of 7.2% until 2030.
Aluminum Industry Outlook
Industry experts are forecasting that India's aluminum demand will double every five years. This optimistic outlook is supported by the Indian government's substantial allocation of ₹11.21 lakh crore for infrastructure development in the 2025-26 budget.
An interesting potential upside is that as other countries face higher tariffs, manufacturing companies might look to diversify production into India, creating a positive spillover effect on domestic demand. This could potentially benefit companies like Vedanta and Hindustan Zinc that have a strong domestic focus.
FY26 Expansion Plans
Several major metal companies have announced ambitious expansion plans for the fiscal year:
Vedanta Limited
The aluminum-to-oil conglomerate is increasing its aluminum production capacity to 3 million tonnes and has acquired one of Odisha's largest high-grade bauxite mines to support this expansion. The company's BALCO smelter expansion is reportedly at an advanced stage, with commissioning targeted in FY'26.
Vedanta Aluminum aims to increase its share of value-added products from the current 60% to over 90%, positioning itself to capitalize on India's growing construction and electric vehicle markets. The company currently sells nearly half of its total aluminum production within India.
Hindustan Zinc Ltd (HZL)
Vedanta's subsidiary has recently established a 30,000-tonne-per-annum zinc alloy plant in Rajasthan to meet the growing domestic demand for value-added zinc alloys. Chairperson Priya Agarwal Hebbar has outlined an ambitious vision of doubling the company's metal production to 2 million tonnes per annum within the next five years.
Hindalco
The aluminum giant has indicated during its investors' day presentations that it expects several key projects to be commissioned this fiscal year, including copper and e-waste recycling initiatives and continuous copper cast rod projects.
Looking Ahead
While the immediate market reaction to global trade tensions has been severe, the long-term outlook for Indian metal companies appears to remain positive, backed by strong domestic demand fundamentals and strategic expansion plans. Investors may need to weather short-term volatility while keeping an eye on how the trade war dynamics evolve in the coming weeks.
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