From Vedanta to Tata Steel, Metal Cos Most at Risk from Trump Tariffs – And Why

As US President Donald Trump's reciprocal tariffs on trading partners take effect, analysts are sounding the alarm for India’s metal sector. The ongoing tariff war and resulting uncertainty are expected to hurt both production and demand, weighing on commodity prices and squeezing company margins.

According to a recent report by Kotak Institutional Equities, Vedanta, Hindalco, and Tata Steel are among the most vulnerable to global macroeconomic pressures. The brokerage has advised investors to remain cautious on the metals sector and avoid “bottom fishing.”

“We expect the ongoing tariff war to be price- and margin-deflationary for all commodities. However, relatively, we find Indian steel producers better placed than aluminum producers,” the brokerage noted in a report dated April 8.

While the Trump administration excluded steel and aluminum from the new reciprocal tariffs announced on April 2, both continue to face a 25% duty under Section 232, effective since March 12.

When these tariffs were first announced, India’s steel industry appealed to the government for relief — a request the Narendra Modi administration honored. The Directorate General of Trade Remedies (DGTR) has proposed a 12% anti-dumping duty on flat steel imports, which Kotak says could drive strong earnings momentum for steelmakers in the coming quarters.

Meanwhile, aluminum remains more exposed to global (ex-China) demand, and the ongoing correction in alumina prices has reduced cost support, the report added.

According to Angel One’s April 9 commodity report, aluminium (April contract) was trading at Rs 231.30 and trending downward.

Dragging Aluminium Prices

Aluminium prices on the London Metal Exchange (LME) have corrected sharply since the announcement of reciprocal tariffs by the Trump administration.

Spot aluminium and alumina prices have dropped significantly to $2,364 per tonne and $373 per tonne, respectively, due to uncertainty from the US tariffs and the normalization of supply, Axis Securities said in a report dated April 7.

The report also noted that aluminium prices at the LME rose 19% year-on-year to $2,624 per tonne in Q4FY25. Alumina prices remained strong at $523 per tonne — although they fell 24% quarter-on-quarter, they were still 44% higher YoY due to earlier supply disruptions.

Indian Firms’ Exposure to US Tariffs

India exports 47% of its aluminium production, but only 6% of that goes to the US, according to a report by ratings agency CRISIL. For the US, Indian aluminium imports account for just 3% of total aluminium imports. The US sources most of its aluminium from Canada (41%), followed by the UAE (6%) and China (11%).

“While the exposure to the US is not huge, the realignment of supply chains following the tariffs and the retaliatory actions anticipated will increase competitive pressures in other export markets,” CRISIL said in a report dated April 4.

The report further noted that India imports a significant amount of aluminium scrap from the US — as much as 26.2% of total scrap imports in FY24 were from the US. With the new tariff framework, US scrap exports are expected to decline, forcing more domestic consumption of secondary aluminium.

“Since Indian manufacturers are backward integrated, they enjoy strong margins and can withstand dumping that may follow the tariffs and potential counter-tariffs by other nations. However, margins might come under pressure to keep exports flowing,” the report added.

Hindalco, which shipped 338 metric tonnes of aluminium in Q3FY25, is expected to see slower EBITDA growth due to lower alumina prices, according to ICICI Securities.

The brokerage also mentioned that Vedanta, led by Anil Agarwal, could see its aluminium production costs rise by $100 per tonne because of high alumina inventory, though lower coal prices may offset some of the impact.

For Tata Steel, crude steel production was affected by maintenance work on the ‘G’ Blast Furnace at its Jamshedpur plant, but output is picking up at its Kalinganagar (KPO-II) facility. Adjusted domestic earnings per tonne for Q3FY25 may improve slightly. Tata Steel Netherlands (TSN) is expected to remain profitable, while Tata Steel UK (TSUK) may continue to post losses.

“We believe companies with business models focused on the local market – Shyam Metalics, APL Apollo, and JSW Steel – should fare better,” said ICICI Securities.

Mixed Expectations for Q4

For the fourth quarter of FY25, brokerages expect mixed results for metal companies. ICICI Securities believes it will be a decent quarter for both ferrous (steel) and non-ferrous (aluminium, zinc, etc.) players. Steel producers are likely to see 3–6% volume growth YoY, with JSW Steel leading at 9% due to capacity expansion. Lower coking coal costs and stable prices are expected to boost profitability.

Axis Securities expects Tata Steel and SAIL to report higher EBITDA from increased volumes and lower coking coal costs, despite a slight dip in steel prices. Aluminium firms like Hindalco and NALCO are also expected to perform well YoY due to stronger prices. However, NALCO’s quarterly earnings may dip because of falling alumina prices.

Motilal Oswal projects only 2% YoY revenue growth for metal companies but expects a 15% rise in EBITDA and a 24% increase in profit after tax (PAT). Steel companies may deliver stronger quarterly performance, while aluminium producers are likely to show better annual growth, supported by strong prices and stable costs.