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Over the past 4-5 weeks, we had around 75 investor meetings across Mumbai, Singapore, and Hong Kong. Discussions mainly focused on takeaways from our China trip and its implications for Indian metals & mining equities, and recent developments in the steel sector. We also engaged with several physical commodity traders in Asia to assess near-term on-the-ground movements in supply-demand balances and prices. Our key takeaway is that sentiment around metals & mining equities is improving. There are likely to be episodes of tariff escalations and de-escalations that would keep commodity markets volatile, though we believe there could be a soft-landing of the trade war through bilateral deals. Meanwhile, China is likely to maintain its export focus, keeping steel demand steady. Overall, this provides a favorable backdrop to selectively add weight to the sector, in our view.Time to be selective

Time to be selective

One clear consensus name that emerged from our meetings is SAIL. It offers the highest operating and financial leverage among the ferrous players. Healthy domestic steel demand, price hikes from safeguard measures, and directionally favorable cost-side movements provide a reasonable delta to SAIL’s profitability and balance sheet. In the non-ferrous space, investors are keenly watching VEDL, though concerns persist that its current upside potential does not sufficiently compensate for the associated risks. We noted positive feedback on GRAV for its sustainable business model, supported by a strong moat in scrap procurement, real-time hedging capabilities, and diversification prospects across aluminium, plastic, rubber, and lithium verticals.

Between ferrous and non-ferrous

Investors were more optimistic than we are on steel. Discussions focused on the evolution of Indian steel demand-supply balances and how China feeds into them. Our view is that India’s net steel imports (~3mt) are unlikely to decline materially, as recent external changes also lead to lower exports even though imports could decline. Most investors held the baseline view that China’s demand will continue to slow, eventually leading to production curbs, although the timing is uncertain. Nevertheless, Indian steelmakers stand to benefit from a reset in price parity driven by safeguarding measures. On aluminium, China’s aluminium demand is growing, turning the country into a net importer, and the call on scrap has also kicked in (a positive signal for commodities). Most investors see non-ferrous stocks as structurally favorably placed, with a preference to add on dips. Investors like copper due to expectations of a market deficit driven by accelerating demand and tight copper concentrate supply.

Equity views

On a 12–24-month horizon, we prefer VEDL, TATA, GRAV, and NACL. Tactically, we see a reasonable upside in SAIL, as the next two quarters are likely to deliver a reasonably high delta in EBITDA spreads. This outlook is supported by firm domestic steel prices and our view that Chinese prices will find near-term support from the tariff truce.

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