Base Metals Rally Built on Supply Constraints, Not Sentiment

Nifty Metal emerged as the top performer in August, rising by around 7% despite a choppy broader market. The rally was driven by firm global metal prices and a recovery in domestic steel prices.

Analysts attribute the current rally in base metals to supply constraints rather than short-term sentiment. Dharmesh Kant, Head - Equity Research at Cholamandalam Securities, said that 'base metals are in bull phase of its own driven by supply constraints and inching demand.'

Harshal Dassani, business head at INVasset PMS, believes the recent gains are less about a sudden demand boom and more about tightening supply. He noted that copper remains near record levels, while expectations for refined production growth in 2026 have been cut to 2.2% from 2.8%, with disruptions in Chile adding to supply concerns.

China's capacity restrictions and environmental curbs are also contributing to the structural tightness in aluminium markets. The country's monthly steel production has fallen around 7% year-on-year to 86.6 million tonnes, reducing the pressure from Chinese exports that has weighed on Indian steel prices.