Steel trap: How Indian metal stocks are caught in the US-China tariff crossfire

Steel trap: How Indian metal stocks are caught in the US-China tariff crossfire

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26 Aug, 2025 12:21

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After weeks of getting hammered on fears of a US recession and tariff tantrums, metal stocks have finally found some footing. A 90-day pause on fresh US-China tariffs, whispers of a China stimulus package, and a sliding US dollar have given the space a much-needed breather.

But it’s still caution over cheer for these stocks.

That’s because the real risk isn’t gone — it’s just circling. With the US proposing a 145% tariff on Chinese steel, Beijing’s likely countermove could be flooding other markets with exports. India, as the world’s second-largest steel producer, could find itself directly in the splash zone. Analysts warn that while Indian companies are largely domestic-oriented, they’re still vulnerable to price shocks from a global glut.

Integrated or insulated?
The fallout won’t be equal. Non-integrated steelmakers like JSPL and JSW Steel are seen as relatively better shielded, thanks to weak iron ore prices and nimble operations. SAIL and Tata Steel, with deeper integration and broader exposure, may have more to lose.

Ferrous players, for now, are still holding up better than non-ferrous peers like Hindalco and Nalco, which are more exposed to the global LME-set pricing and the whims of international demand. "India’s aluminium players are price-takers, not price-makers," one analyst quipped. With falling alumina and zinc prices, non-ferrous names may continue to sweat.

The dumping dilemma

With Chinese steel potentially boxed out of the US, it could be redirected to Asia and Europe. But both regions are raising their guard — Europe with quotas, South Korea with anti-dumping crackdowns. That leaves India in a tricky spot: enough local supply, but not enough trade barriers if things get messy.

There’s already a 3% import parity — imported steel is that much cheaper than local. If Chinese prices drop further, that gap widens. Even a up to 20% safeguard duty might not be enough to plug the hole.

What are brokerages saying

Brokerages are striking a cautious tone on Indian metal stocks, with views ranging from selective optimism to outright caution amid global volatility, domestic policy moves, and cost dynamics.

Elara Capital expects near-term support for domestic steel prices, aided by the proposed 12% safeguard duty on flat products, seasonal infrastructure demand, and white goods activity. Still, it flags risks from rising domestic capacity and global oversupply, with tariff uncertainty limiting any sustainable rally. Within ferrous, upstream players like NMDC remain exposed to spot price volatility and policy swings, while downstream value-added names such as Ratnamani Metals & Tubes are seen as more insulated.

Traders have been chasing SAIL and Tata Steel on the assumption that elevated prices will persist, but Citi isn’t convinced. While SAIL offers the most upside if spot prices hold, followed by Tata Steel, Citi’s base case assumes normalization. That would compress EBITDA per tonne and weigh on valuations. The firm believes JSW Steel and JSPL have already priced in near-term gains, leaving little room for upside.

ICICI Securities also cautions that the current rally may not last. The firm warns that Chinese exports and global oversupply could drag prices lower once tariff-driven tightness fades. Citi echoes the concern, suggesting current steel spot prices are inflated by supply shocks and tariff fears. A reversion to import parity pricing—roughly Rs 3,000/tonne lower—could compress earnings across the board.

Emkay Global sees value in cost-efficient players like JSPL and Lloyds Metals, but is still trimming forecasts, warning of up to a 25 percent EBITDA hit in a bearish scenario. Prabhudas Lilladher is more bullish, citing firm domestic demand and a near-term lift if the Directorate General of Trade Remedies' (DGTR) recommended safeguard duty is imposed.

The mood isn’t upbeat on aluminum. However, aluminium major Hindalco continues to find takers. Anand Rathi backs the stock, arguing that even if LME prices soften, Novelis’ specialty portfolio provides a margin buffer. Lower input costs and rising domestic demand could further support profitability.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.​​​