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Metal stocks in focus: What should investors do amid global uncertainty?
Metal stocks in focus: The base metal industry seems to be caught in a demand-supply mismatch, threatening the near-term growth outlook for related players. Besides, flip-flops in trade deal negotiations between the United States (US) and China are adding to the uncertainty, leaving analysts cautious about the metal sector.
Analysts believe a troica of a supply surplus, weak demand, and strengthening of the US dollar may keep metal prices under pressure in the near-to-medium term, keeping stocks of related players sideways.
"Overall, for medium-to-short-term metals stocks are going to be range-bond," said Kranti Bathini, director of equity strategy, WealthMills Securities.
Notably, an increase in metal prices aids revenue per unit sold for companies extracting or selling those metals. Conversely, when metal prices fall, earnings drop and stock prices decline.
Supply surplus
According to International Copper Study Group (ICSG), an autonomous inter-governmental organisation which maintains database for copper prices, global copper market is projected to witness a global surplus of 289,000 tonnes in 2025 -- more than double the 138,000 tonnes recorded in 2024, and significantly higher than previous estimates of 194,000 tonnes. The growing surplus is attributed to increased mine supply and smelting capacity.
On the flipside, the organisation expects uncertainties around international trade policy, especially between the US and China, to reduce copper demand. It expects refined copper consumption to grow 2.4 per cent in 2025, lower than the previous projection of 2.7 per cent and a growth of 2.8 per cent in 2024.
Copper demand may further slow to 1.8 per cent in 2026—largely driven by a drop in Chinese usage, from 2 per cent this year to just 0.8 per cent next year, it forecasts.
China: A key monitorable
Analysts view the US-China trade, having a direct impact on China's metal demand, as the key monitorable for metal prices. China is a major global consumer of metals, particularly base metals.
According to a note by Motilal Oswal Financial Services, the recently announced US-China tariffs are less severe than expected, but present a notable hurdle to global trade. This, the brokerage believes, could potentially dampen demand for key raw materials used in metal production, capping any gains in metal prices.
Last week, the US and China jointly declared a 90-day pause on a portion of their existing tariffs. China agreed to lower tariffs on US goods from 125 per cent to 10 per cent, and the US affirmed to reduce tariffs on Chinese goods from 145 per cent to 30 per cent.
Amid severe price volatility, Aluminium is quoting around $2,450.5 on the London Metal Exchange (LME), Copper was at $9,545, and Zinc at $2,658.5.
On the bourses, however, the Nifty Metal index has rallied 10 per cent on the National Stock Exchange (NSE) since the announcement, as against the Nifty50's rise of 0.38 per cent. In May so far, the index has gained 7 per cent as against a 2.7-per cent rise in the benchmark index.
"Demand trends in China, coupled with the renewed strength in the US dollar, may lead to short to medium term pressure on the metal prices," said Gaurang Shah, head investment strategist, Geojit Financial Services.
Silver lining
That said, the outlook for domestic metal stocks, analysts believe, remains positive from a long-term perspective.
"Robust demand from infrastructure and real estate, back home, may offset weakness in global demand. These two sectors are the largest consumers of metals, both ferrous and non-ferrous," said Gaurang Shah of Geojit.
He added: Some upward revision is expected for metal prices. More importantly, the input cost, which was an issue in earlier financial years, has now been lowered. So the profit margins could improve in the long-term.
Investment strategy
Shah recommends investors to bet on metal stocks from a long-term perspective. He remains upbeat on Tata Steel, JSW Steel, Hindalco, Vedanta, GSPL, and NMDC.
Bathini suggests 'buying metal stocks on dips'. He is positive on Hindalco, Vedanta, and JSW Steel.
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