When all sectors have succumbed to geopolitical tension, metal has surged significantly since last Thursday when Russia launched an all-out war on Ukraine, creating supply crisis of commodities. As against the benchmarks declining nearly 2.5 per cent in the holiday-shortened week, the metal indices have gained around 8 per cent in the last four trading sessions, including Friday's. 

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Disruption in supply chain 

The surge in metal comes on back of supply crisis due to Russia-Ukraine war. India, which was the second largest producer of steel with 99.6mt in 2020, is set to benefit from this crisis.   

With Russia, the fourth largest steel producer in the world in 2020 with 73.4mtpa capacity, facing sanctions for raging war on Ukraine has created demand for Indian metals. Russia was also the third largest aluminum producer (at 3.6mt) and the third largest nickel producer (at 250kt) in the world.  

Brokerage house Motilal Oswal says as Russia is a commodity powerhouse and net exporter in many, sanctions on Russia will impact the prices of aluminum, nickel, steel, thermal coal, and PCI coal positively. 

"We believe sanctions on Russia will impact the prices of aluminum, nickel, steel, thermal coal, and PCI coal positively. In addition, it will lead to cost escalations because of alternative sourcing, delays in establishing new sources, delays in payments and consequent deferrals in shipment releases among others," says Motilal Oswal.  

The brokerage is of the view that sanctions on Russia will help Hindalco, Nalco and Coal India big time with huge demand for commodities by European countries.  

"We expect steel prices in Europe to rally and remain elevated and TATA is likely to be the key beneficiary of the same," it said.  

India being a net exporter of aluminum and companies such as Hindalco, Nalco and Vedanta will benefit from the elevated aluminum prices. 

Commodities prices to remain elevated for months  

The brokerage says the sanctions on Russia will lead to a disruption in supply chain for several commodities and it may take up to several months to reinstate the entire supply chain. "Prices are likely to remain elevated until this is achieved. Besides, payments are likely to be delayed and complicated mechanisms need to be adopted.  Costs of sea freight and insurance are also likely to shoot up," it adds. 

Top Stocks to buy 

Hindalco | Buy 

Motilal Oswal top pick in the non-ferrous large cap space was Hindalco. It sees a target price of Rs 700 for Hindalco.   

NALCO | Buy 

Top pick in the non-ferrous mid-cap space with a target price of Rs 184  

Coal India | Buy 

Top pick in the mining domain – driven by rising e-auction premiums – with a target price of Rs 245.   

Tata Steel | Neutral  

Saying it is a direct beneficiary of rising steel prices in Europe, the brokerage maintained neutral target with target price of Rs 1,497.  

Vedanta | Neutral 

Beneficiary, but valuations rich. Target price revised Rs 373 to Rs 450 post revision of commodity price forecasts. 

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)