Metal companies feel the heat as commodity prices continue to dip

Weighed down by a sharp fall in prices of metals globally, stocks of commodity-based companies have seen a huge price erosion. Shares of metal companies like Hindalco, Vedanta, Tata Steel and JSPL have come off sharply in the past few weeks, falling by up to 50% from their recent peaks and analysts expect them to report muted numbers for the first quarter ended June.

Their woes are unlikely to end soon as the Bloomberg Commodity Index has fallen almost 14% over the past three weeks, indicating that lower realisations are in the offing for metals producers.

With the growing fears of a recession in the US, prices of a range of metals — from copper to steel — have declined by up to 40% from their recent highs.
Moreover, the combined impact of the Covid lockdown in China, which is the top producer of metals, and interest rates tightening elsewhere, has put a cloud over the global metal demand outlook.