Base Metals Spur TSE Growth

Base metal stocks have been the Iranian equity market’s undeniable stars in the current fiscal year (started March 21, 2017), as a rally in global prices coupled with a weaker currency pushed them to new highs.

Base Metals’ index at Tehran Stock Exchange surged 72.87% from March 21 up to the end of January, jumping from 34,044 to 58,852.3. The index hit its all-time high of 60,930 on January 17.

The index’s 20 tracked shares were mostly on the rise, with steel, aluminum, copper, lead and zinc firms pushing ahead, Metal Bulletin reported.

This was mostly due to 2017 being a particularly strong year for base metals. 

In December 2015, the collective global mining industry’s market capitalization, based on 2,500 companies tracked quarterly by S&P Global, fell to its lowest point since March 2009. But from a level of under $900 billion just over two years ago, that figure had climbed near $1,500 billion by September last year.

> Steel

Steel gained in 2017 on the back of China continuing to target overcapacity and strong demand from major downstream industries. 

By the end of August, the country had already met its target of eliminating 50 million tons per year of crude steel capacity.  Construction and automobile demand for steel were also up during the year. Hot-rolled coil and rebar prices consequently gained, boosting Iran’s exports.

Iran’s largest flat steel producer, Mobarakeh Steel Company, was among the primary winners of rising prices. Its shares surged 112% from 1,409 rials on March 21 to 2,998 on Jan. 31.

"MSC’s recent capacity expansions have more than tripled its slab exports to 1.72 million tons in the first seven months of the current fiscal year," Managing Director Bahram Sobhani told Metal Bulletin.

Iran's largest steel exporter, Khouzestan Steel Company, also staged a strong performance, as its shares rose 41.45% from 3,278 rials (7 cents at current exchange rates) to 4,637 (about 10 cents).

> Aluminum

The rally in 2017 happened on its last trading day, with aluminum climbing to a yearly high of $2,290 per ton, and just in time to make it the strongest performer of the year with a 34% overall growth, according to London Metal Exchange data.

Iranian aluminum producers, however, did not shine as expected since the industry is grappling with issues of its own. On the one hand, they are dealing with troubled access to alumina, high production costs and low economies of scale, and on the other, their sorry financial state has weakened their status in the stock market.

Iran Aluminum Company, for instance, lost 5 months of the current fiscal year as its ticker was frozen by market regulators over financial concerns. Alumrad Company was also barred from trading in mid-July up to Nov. 19. The producers did have a wide enough window to cash in on rising prices, although with mixed results.

IRALCO’s shares rose 70.42% during Aug. 15-Jan. 31 from 886 rials (about 2 cents) to 1,510 (3 cents). Alumrad, on the other hand, lost 24.6% down to 3,094 (6 cents) during March 21-Jan. 31.

> Copper

Copper was also trading close to a four-year high just shy of $7,300 per ton after having exceeded the $7,000 mark the week before Christmas and closing the year 31% up, making it the year’s second-best performer.

Copper prices looked as though they had peaked in the summer after they hit their highest since November 2014 in early August, but the metal continued to strengthen and peaked again in December.

The red metal hit a high of $7,731.5 on Dec. 28–its highest in four years–supported by bullish sentiment for the new year. Threats of industrial action continue to support copper, with nearly 40 labor contracts due for renewal in 2018–the highest level since 2008.

Iran’s flagship copper producer National Iranian Copper Industries Company also gained adequately, as its shares grew 36% from 2,007 rials (4 cents) each to 2,734 rials (about 6 cents) on Jan. 31. 

NICICO is planning to further cash in on increased prices, as it recently inaugurated 13 expansion projects valued at about $760.8 million.

> Lead, Zinc

Zinc also had a strong year, soaring above $3,000 per ton for the first time since 2007 in early December. Since then, zinc has continued to climb, reaching a yearly high of $3,326 per ton and closing the year 29% higher.

Lead was not far behind its sister metal closing the year 24.2% higher on the back of supply tightness and a weaker US dollar. LME lead price hit a six-year high of $2,620 in October.

The TSE-listed National Iranian Lead and Zinc Company was consequently on the rise. Its shares gained 50.59% during March 21-Jan. 31 to close at 3,932.