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Ferrous companies in our coverage universe are likely to report sequentially higher spreads on account of improved realisations off-setting higher coking coal cost. Volumes across steel companies are expected to be lower sequentially, primarily on account of seasonally weak quarter. Net realisations during the quarter are likely to witness an average increase of ~INR1-1.2k/t QoQ while coking coal costs are likely to increase by US$10-30/t QoQ. This will result in marginal increase in margins across players. We expect the non-ferrous companies to be positively impacted by sequentially higher realisations. China property market continues to play spoil sport with minimal sign of resurgence despite Government efforts. Further, higher imports from China at competitive prices continue to weigh on domestic realisations. Uptick in chinese demand and resumption of exports from India remain key monitorables going forward. We remain constructive on the metals space with HNDL/JSP being our preferred picks.

proved realisations likely to offset higher RM cost: Ferrous companies in our coverage universe are likely to report sequentially higher spreads on account of improved realisations offsetting higher coking coal costs. Volumes across steel companies are expected to come in lower sequentially, primarily on account of seasonally weak quarter. Net realisations during the quarter are likely to witness an average increase of ~INR1-1.2k/t QoQ while coking coal costs are likely to increase by US$10-30/t QoQ. This will result in marginal increase in margins across players.

Higher LME to positively impact margins in non – ferrous space: We expect the nonferrous companies to be positively impacted by sequentially higher realisations. Hindalco is likely to witness steady margins during the quarter with Indian operations expected to be negatively impacted by lower volumes while Novelis spreads are expected to decline sequentially to US$475/t due to planned shutdown in Oswego, US. We therefore expect Novelis volumes to decline sequentially by ~1%. We expect Hindustan Zinc EBITDA to increase by 9% QoQ primarily due to higher volumes and flattish CoP.

Chinese demand continues to be a mixed bag: Chinese property market remains a drag, showing little sign of recovery despite government stimulus in the form of rate cuts. On the contrary, demand from the automotive sector remains robust. Overall muted demand scenario in china and consequent increase in exports at competitive prices continue to weigh on domestic realisations. Resurgence of chinese demand and resumption of exports from india to remain key monitorable going ahead.

HNDL / JSP preferred name in metal space: Margins for steel companies are expected to improve sequentially in 3Q largely tracking increase in realisations. Any correction in coking coal prices going forward is likely to aid spreads for steel majors. We remain constructive on the metals space with HNDL/JSP being our preferred picks.

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