Local metal cos to gain from surging China demand | Economic Times

ET Intelligence Group: China has turned into a major importer of steel, aluminium, copper and iron ore in the past three months through August. This was the first time in 11 years since the country’s infrastructure binge in 2009 after the financial crisis. If sustained, the trend may boost India’s metals and mining sector.Historically, Chinese demand has shown cascading effect on Indian metal companies. After the bout of strong demand in 2009 from China, the Nifty Metal index had more than tripled to 4800 in March 2010 within a year.Metal companies such as Vedanta, NMDC, Hindalco, JSW Steel, Jindal Steel, NALCO and Hindustan Copper are expected to benefit from the current trend in the Chinese demand. Companies such as JSW Steel, Jindal Steel and Tata Steel have reported a strong jump in exports at over 50 per cent of total sales in the first quarter largely due to upbeat demand from China. 78158573The demand uptick in China is at a time when demand elsewhere in the world is subdued. A major reason for the contrasting trend is the economic push in China. In May, the country, which accounts for nearly half of the world’s commodity capacities and demand, announced its largest ever economic rescue package at $560 billion. It also announced that local governments will issue $525 billion worth bonds to boost the infrastructure. Record low interest rate of 3.8 per cent is also holding the property demand.“China’s economic recovery post Covid-19 has turned out to be faster than expected. Growth in infrastructure is likely to accelerate in the coming quarters amid continued support from both central and local governments,” noted Qu Hongbin, chief China economist, HSBC, in a recent report.The rising demand from China has also led to higher prices of steel, copper and aluminium, which have increased by 25 per cent, 30 per cent and 25 per cent respectively.