Metal shares fall nearly 5% as dollar hits three-month high amid US-Iran war; NALCO, SAIL among top losers

Metal shares fall over 3.5% as dollar hits three-month high amid US-Iran war; NALCO, SAIL among top losers

• Metal stocks fell nearly 5% as dollar hit a three-month high
• Aluminium makers Hindalco and Nalco dropped over 5% each
• Metal prices fall due to Middle East conflict and rising oil prices

Did our AI summary help?

Metal stocks fell nearly 5% on March 13 as the dollar rose to more than three-month high on Friday and was set for its second weekly gain since the beginning of the war in Iran as turmoil in markets left it the last safe-haven standing.

On March 13, Nifty Metal index closed trading 4.8% lower at 11,292.5.

Aluminium makers Hindalco and Nalco dropped 6.5% and 5.5%, respectively, tracking a drop in global aluminium prices.

The session's losses capped the weekly gains of Hindalco and Nalco, driven by supply risks from the Middle East.

Aluminium prices retreated from their highest level since 2022 on Friday, with other base metals also declining as concerns over the economic fallout from a prolonged conflict in the Middle East weighed on market sentiment.

There were few indications that the conflict would ease soon, with Donald Trump and Mojtaba Khamenei adopting defiant stances. While aluminium remains on course for a strong weekly gain due to supply disruptions, investors are increasingly wary that surging energy prices could dampen global metals demand by slowing economic growth.

On the London Metal Exchange, aluminium slipped 1% to $3,481.50 a tonne as of 5:56 a.m., after rising about 4% over the previous three sessions. Prices of copper, zinc and nickel also moved lower.

The intensifying conflict has heightened fears of a stagflationary shock, as soaring energy costs risk driving inflation while weakening economic growth. Metals such as copper have declined since the outbreak of the war, while aluminium has risen because the Middle East accounts for roughly a tenth of global supply.

Industrial disruptions across the region remain widespread, and shipments of commodities through the Strait of Hormuz have nearly come to a standstill. The duration of the conflict, however, remains uncertain.

The dollar rose to a more than three-month high on Friday and was set for its second weekly gain since the beginning of the war in Iran as turmoil in markets left it the last safe-haven standing.

The euro fell to its lowest level since November, and Japan warned that it was ready to take action to protect against declines in the yen, which touched its weakest point in 20 months.

With oil prices surging, the U.S. permitted the sale of some Russian petroleum products that had been sanctioned due to Moscow's hostilities in Ukraine. Iran stepped up attacks on oil and transport facilities across the Middle East as its new Supreme Leader Mojtaba Khamenei vowed to keep the Strait of Hormuz shipping lane closed.

Already, Aluminium Bahrain BSC has declared force majeure to customers due to logistical disruptions. Such disruptions have sent traders rushing to withdraw metal from warehouses and premiums for immediately available physical metal have jumped.

However, Norsk Hydro ASA, a joint-venture partner in Qatar Aluminium Ltd., said the major smelter will be able to avert a full shutdown after securing natural gas supplies.

Hindustan Zinc shares fell over 5% amid bleak prospects for silver as Street sees fewer chances of less monetary easing as the war in Iran sent oil prices soaring.

Among other metal losers are Hindustan Copper, SAIL, Tata Steel, among others, which declined 3-5.5%.

"Global metal prices for copper, aluminium, and zinc weakened due to fears of a global economic slowdown and continued weak demand from China's property sector," Ajay Kedia, director of Kedia Stocks & Commodities Research Pvt. Ltd told The Informist.

Surge in input costs as crude oil prices crossed $100 per barrel has put pressure on the profit margins of major steel producers such as Tata Steel and JSW Steel, according to Kedia. The rise in coking coal prices has also affected the profit margins of these companies. Persistent selling by foreign institutional investors is also weighing down heavyweight metal stocks, he added.