The rise of electric vehicles makes aluminium more attractive than steel

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The rise of electric vehicles makes aluminium more attractive than steel
BCCL
  • Indian metals stocks were in a weak trend today after a new report by global investment bank Jefferies gave a poor outlook for 2022.
  • However, the report showed rising inclination of the Chinese economy towards electric vehicles resulting in good future demand for aluminium used in all EVs.
  • Aluminium is the cheapest and one of the lightest metals, which is used in manufacturing of EVs to make it light weight.
A new research report says that the increasing share of electric vehicles (EV) in global mobility is good for aluminium producers like Hindalco, and not so good for steel makers. Global investment bank Jefferies expects the share price of Hindalco to give about 30% more returns than its steel producers like Tata Steel and JSW Steel for those who have a taste for metal stocks.
Metal companiesTarget price by global brokerage firm JefferiesCurrent market priceImplied returns in the next on year
Hindalco Industries₹660 ₹490 35%
Tata Steel₹1,240 ₹1,148 8%
JSW Steel₹600 ₹657 -8.6%
Coal India₹160 ₹160 Target price achieved
Aluminium is the cheapest and one of the lightest metals, which is used in manufacturing of EVs and is used in the aerospace industry as it helps reduce the overall weight of the structure while maintaining the strength.

Reportedly, in the non-EV segment, the average aluminium consumption is about 50-70 kilograms (kg) in a car and 20-30 kg in a motorcycle. Globally, on average around 250 kg of aluminium is believed to be used in each EV. As a result, vehicles with aluminium bodies become costlier than others.

Meanwhile, the demand for metal commodities like steel has been slowing down since September 2021 when Evergrande, the second largest real estate developer in China, crumbled under the weight of its own debt. “The slowdown in the property sector added to the pressures of an already weakening economy,” said the report by Jefferies.
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The Chinese economy, which is the world’s biggest buyer of commodities like steel, has been sluggish ever since. China’s gross domestic product (GDP) grew at a disappointing 4.9% in the July-September quarter as against the expectation of 5.2% due to issues like power shortage in the country, poor investment activities and so on.

“Although easing policy could lift Chinese demand, we still find risk-reward much inferior to a year ago,” said a report by Jefferies. The pessimism of the analysts took a toll on metal stocks in India on Tuesday (January 11).
Metal companies% change as of 12:00 p.m., on Jan 11
Steel Authority of India-3.74%
Jindal Steel & Power-3.15%
JSW Steel-2.54%
Tata Steel-1.65%
NMDC-1.14%
Hindustan Zinc-0.98%
Vedanta-1.49%
Hindustan Copper-0.42%
Coal India-1%
Ratnamani Metals and Tubes-0.84%

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