Motilal Oswal sees surging metal costs to offset value inflation for metallic majors. Listed here are its high inventory picks
In its newest report launched on Thursday, the brokerage mentioned costs have remained agency within the ongoing second quarter of FY27 regardless of seasonal weak point, supported by lean channel inventories, maintenance-led provide constraints and rising enter prices.
Home hot-rolled coil (HRC) costs jumped 7% month-on-month to a four-year excessive of Rs 62,000 per tonne in September, whereas cold-rolled coil (CRC) costs rose 8% MoM to Rs 70,500 per tonne.
Rebar costs additionally recovered sharply to Rs 56,800 per tonne in September, from Rs 48,850 per tonne in June. This rally indicators a broad-based pricing power throughout each flat and lengthy merchandise, Motilal Oswal mentioned.
The home brokerage attributed the advance in metal costs primarily to value pass-through, including that enter prices (coking coal, iron ore and pellet) have concurrently elevated, elevating the associated fee base for steelmakers. Premium Australian coking coal worth has risen to $300 per tonne from $260 per tonne in June 2026, implying that each $10 per tonne enhance in coking coal provides practically $7-8 per tonne to enter prices, making a margin headwind. Iron ore and pellets costs additionally remained agency in the course of the muted demand cycle, it added.
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Robust metal demand outpaces manufacturing development
Home metal volumes, in the meantime, remained essentially wholesome. India produced round 67.4 million tonnes of completed metal in the course of the interval between April and August this yr, up 3.7% YoY, whereas finished-steel consumption grew by a stronger 7.2% YoY to 70.3 million tonnes, in line with the brokerage. The quicker development in consumption relative to manufacturing has saved the home market comparatively tight, it added.Motilal Oswal famous that the worldwide quantity backdrop is equally supportive from a provide perspective. World crude metal manufacturing declined 0.6% YoY to round 1.08 bt in the course of the interval between January and July this yr, with China’s output falling 3.1% YoY to almost 577 mt. The structural decline in Chinese language metal output is vital for international market stability given China’s main position in international metal manufacturing and exports, the home brokerage famous.
Why Motilal Oswal is constructive on home metal pricing
“Within the close to time period, we stay constructive on home metal pricing as we imagine the home metal cycle is transitioning from volume-led restoration to pricing and cost-led earnings development. Lean inventories, constrained provide, resilient underlying consumption and international value inflation present the inspiration for greater metal costs. If postmonsoon demand normalizes as anticipated, the sector might enter 2HFY27 with a significantly stronger realization atmosphere than the present consensus assumptions indicate,” Motilal Oswal mentioned.
The home brokerage believes the fast earnings trajectory might be backed by constructive realisation momentum, whereas margin sustainability will rely upon the mills’ capacity to go by means of additional worth will increase because the impression of value inflation might be evident steadily within the coming quarters. Corporations with stronger value positions, captive uncooked supplies and higher downstream or value-added publicity must be higher positioned to defend margins, it added.
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Motilal Oswal’s high metal picks
Motilal Oswal named JSW Metal and Tata Metal as its high picks among the many metal firms. JSW Metal shares have gained round 9% in 2026 up to now and 14% in a single yr. In the long run, the shares of the corporate jumped 58% in three years and 87% in 5 years. The corporate has a market capitalisation of round Rs 3.12 lakh crore.
Tata Metal shares, in the meantime, rose round 3% in 2026 up to now. In the long run, the shares of the Tata Group firm have gained 9% in a single yr, 44% in three years and greater than 35% in 5 years. The corporate has a market capitalisation of round Rs 2.34 lakh crore.
Disclaimer: This text has been written by Debaroti Adhikary, who isn’t a SEBI-registered Analysis Analyst or an Funding Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as outlined beneath Part 2(77) of the Corporations Act, 2013) don’t maintain any monetary curiosity within the firms talked about on this article as of the date of publication. The views/suggestions talked about on this article, wherever relevant, are these of the respective SEBI-registered Analysis Analyst/brokerage and have been reproduced/reported with due attribution. They shouldn’t be construed because the views or suggestions of The Financial Instances Digital or the journalist. Readers are suggested to think about the unique analysis report and make their funding choices based mostly on their very own evaluation. Brokerage disclaimers right here.
