According to a report by Investec, steel mills are expected to continue their expansion in the first quarter of the financial year 2026, driven by higher steel prices and lower coking coal prices. This trend is likely to persist, having already contributed to growth in the fourth quarter. The non-ferrous segment, which includes companies such as Vedanta Ltd. and Hindalco Industries, is expected to experience mixed growth in the coming period.
Vedanta Ltd. is seen as a key player in this segment, with multiple triggers that could drive growth. These include a potential pay-out, demerger, and cost per volume tailwinds, which could have a positive impact on the company’s performance. In contrast, Hindalco Industries is expected to face a capital expenditure bump, which could negatively impact its growth, and is not expected to benefit from cost per volume tailwinds.
Another factor that could impact the non-ferrous segment is the LME-Scrap spreads, which refers to the difference in price between scrap metal and primary metal on the London Metal Exchange. The full impact of tariffs on this spread is likely to be felt by Novelis, a leading producer of aluminum rolled products. As a result, Vedanta appears to be well-placed to take advantage of the current market conditions.
However, Investec has cautioned that there are potential risks to Vedanta’s growth, including the evolving situation with regards to Guinea bauxite licenses and alumina pricing. Bauxite is a key input for aluminum production, and any changes to licensing regulations or pricing could have a significant impact on Vedanta’s operations. As such, investors are advised to keep a close eye on these developments and their potential impact on Vedanta’s performance. Overall, the outlook for the non-ferrous segment is mixed, with Vedanta appearing to be well-placed to take advantage of current market conditions, but with potential risks on the horizon.