Key Highlights

The Nifty Metal Index has faced significant selling pressure over the last two trading sessions, driven by global uncertainties, geopolitical tensions, and supply chain disruptions. On December 13, 2024, metal stocks, including major companies like JSW Steel, Tata Steel, NMDC, and SAIL, saw sharp declines of 3-5%.

One of the hardest-hit companies was National Aluminium Company (NALCO), a key aluminium producer and exporter in India. On December 12, 2024, NALCO’s stock tumbled by 7.50%, reflecting mounting concerns over global supply chain disruptions and rising input costs.

Supply Chain Disruptions in Mozambique

The steep decline in NALCO’s stock price can be traced to political instability in Mozambique, where recent civil unrest following a disputed election has led to widespread protests and transportation blockages. This instability has severely disrupted the supply of raw materials to the Mozal Aluminium Smelter, causing operational challenges. Road blockages and escalating violence have hindered the movement of alumina, a key raw material in aluminium production.

Rising Alumina Costs Adding Pressure

Adding to the turmoil, the price of alumina has more than doubled over the past year due to production disruptions in key regions, including Mozambique. This surge in alumina prices has significantly increased production costs for aluminium manufacturers, eroding their profit margins.

China, one of the largest producers and consumers of aluminium, has also been affected by rising alumina costs. Smelters in China have had to scale back production, intensifying concerns about the sustainability of aluminium production at elevated input costs.

China’s Economic Uncertainty Weighs on Metal Markets

The broader metal sector is also grappling with concerns stemming from China’s economic slowdown. Despite the conclusion of a high-level economic meeting where China’s leadership reaffirmed its commitment to boosting growth, the absence of detailed stimulus measures has left investors skeptical.

Earlier this week, optimism briefly returned when China hinted at its first major monetary policy shift in 14 years. However, investors remain cautious, as substantial and large-scale stimulus measures appear unlikely at this stage.

China, the world’s largest importer of metals, continues to face significant economic challenges, including:

Although the Chinese government introduced several stimulus measures since late September, recent economic data reveals limited success in reviving growth. This slowdown has had a direct impact on global metal demand, as China remains a key driver of prices and consumption in the metals market.

Stock Technical Analysis

NMDC Ltd. (NSE: NMDC) stock was trading at ₹233.73 (at the closing of 13 December 2024), showing signs of sideways consolidation between ₹225 (support) and ₹240 (resistance) after a recent uptrend. The Relative Strength Index (RSI) at 51.64 indicates neutral momentum, with no overbought or oversold signals. The overall trend is mildly bullish to neutral, supported by higher lows since mid-September. A breakout above ₹240 with strong volume could signal further upside, while a drop below ₹225 may lead to weakness. Traders should monitor price action and volume for confirmation of the next directional move.

Source – Refinitiv, Analysis by Kalkine Group

National Aluminium Company (NALCO) (NSE: NATIONALALUM) is currently trading at ₹226.46 (at the closing of 13 December 2024). Over the past six months, the stock experienced a strong uptrend from ₹160 to a peak of ₹260 before witnessing a sharp pullback. The price is now near the key support level of ₹220, where it appears to be stabilizing. Resistance is seen in the ₹240-260 range, which previously triggered selling pressure. The Relative Strength Index (RSI) stands at 39.28, nearing oversold territory, suggesting a possible reversal if buying interest emerges. While the overall trend remains mildly bullish, the recent decline signals short-term weakness. Traders should monitor a bounce near ₹220 or a breakout above ₹240 for renewed bullish momentum, as a breakdown below ₹220 could lead to further downside.

Source – Refinitiv, Analysis by Kalkine Group

Outlook for Metal Sector

The combined effects of supply chain disruptions, rising production costs, and economic uncertainties in China have created significant headwinds for the global metal industry. While the Nifty Metal Index remains under pressure, investors will closely monitor developments in China’s economic policies and efforts to stabilize supply chains in regions like Mozambique. For now, the outlook remains cautious as geopolitical instability, high input costs, and weak global demand continue to weigh on metal stocks.

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