The increase in demand for industrial metals is attributed to the revival of manufacturing activity in the world’s two largest economies, the United States and China. Recent data indicate a strong rebound in manufacturing activity in both countries.
Also Read: Chinese Investors Grab Copper, Gold Stocks to Drive 10% Gains
In the United States, manufacturing grew for the first time in a year and a half in March, with significant increases in production and new orders. Similarly, China’s manufacturing activity expanded for the first time in six months in March, signaling a recovery despite ongoing challenges in the property sector.
However, analysts expect China to announce more stimulus measures to revive the challenges in the housing sector, which could further fuel demand for metals.
The latest readings of the Purchasing Managers’ Index (PMI), which reflect manufacturing activity, showed notable improvements. In China, the PMI reached its highest level since March last year, driven by increased export orders and an increase in factory output.
Also Read: Gold price rise: Confused by the rise, Chris Wood in Green and Fear explains probable reasons behind it
Consequently, Goldman Sachs revised its outlook on China’s economic growth, anticipating a stronger expansion than previously estimated.
Meanwhile, in Europe, Germany’s industrial production exceeded expectations in February, driven by recoveries in the construction and automotive industries. This positive trend suggests that Europe’s largest economy is on track to overcome recent manufacturing challenges and regain momentum.
Also Read: India manufacturing hits 16-year high in March
Back in India, the manufacturing PMI improved to 59.1 in March from 56.9 in February. Growth in new orders accelerated to the fastest in nearly three and a half years during March.
Metals explode
The rebound in manufacturing activity in major economies led to an increase in demand for metals, resulting in a sharp rise in prices in just a few months.
The price of copper has soared more than 15% over the past two months, reaching near a 15-month peak on the London Metal Exchange. Meanwhile, the metal hit an all-time high on the Shanghai Metal Exchange this week.
Global investment bank Citi predicts the potential for an “explosive price rise” for copper in the next three years, driven by increased urbanization and industrialization, particularly in China. The bank expects copper prices to rise, with projections reaching $10,000 per tonne by the end of 2024 and climbing to $12,000 in 2026.
Also Read: Chart Beat: Aluminum prices may take time to shine
As demand for copper increases due to increased use in power cables, wind turbines, electric vehicles and solar panels, supply disruptions from China’s mine closures threaten to affect global supply. Chinese smelters, responsible for more than half of the world’s refined copper production, are facing disruptions, contributing to supply concerns.
Zinc prices have increased by 12% in the past two weeks, reaching a near one-year high. Reduced supplies from refiners, struggling with lower profits for processing the metal, drove this upward trend.
Tin prices rose to their highest levels in more than a year, with stocks falling to the lowest levels in nine months. Three-month Tin on the London Metal Exchange hit an annual high of $32,745 per metric ton on Wednesday.
In today’s trade, Shanghai aluminum rose to its highest level in nearly two years. Meanwhile, three-month aluminum on the London Metal Exchange is on track for a fifth straight weekly gain, according to media reports.
Indian metal stocks gain momentum
Amidst the continued rise in metal prices, Indian metal stocks have experienced significant growth as evident in the sharp rise in the Nifty Metal index, which has surged more than 17% in less than a month. Contributing to this rally are strong business updates from Q4, boosting investor confidence.
Notably, Hindustan Zinc, a subsidiary of Vedanta, has witnessed a remarkable 37% rise in its shares over the past 8 trading sessions alone. In today’s trading, the stock soared another 8.4% to hit an all-time high ₹450 per share. Similarly, Hindustan Copper, a state-owned mining company, has seen its shares soar 55% in less than a month.
Vedanta, India’s leading diversified natural resources company, also witnessed a sharp 46% return in less than a month. Global brokerage firm CLSA’s recent ‘buy’ rating and target price update to ₹390, up from ₹260, further fueled investor optimism.
According to CLSA, Vedanta is well positioned to capitalize on the commodity upcycle due to its diversified exposure. Additionally, the company’s initiatives to improve capacity and profitability across segments are viewed favorably by analysts.
Disclaimer: The opinions and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 12 Apr 2024, 15:17 IST
(tagsTranslate)Markets