Base Metals Rally Loses Steam as Easy Gains Fizzle Out

The rally in base metals is losing steam, and investors may need to adjust their expectations. Over the past year, prices have surged on the London Metal Exchange, with tin leading the pack at a 55.6% gain. Copper followed closely behind with a 45.4% increase, while zinc and aluminium rose 38.3% and 26.2%, respectively. Nickel was the only laggard, rising just 10%. The gains were driven by supply-demand imbalances, with shortages and production cuts supporting prices.

However, analysts believe that easy gains are now behind us. Shweta Dikshit, vice president and lead analyst for metals & mining at Systematix Institutional Equities, noted that key base metals continue to see surging demand from infrastructure and emerging segments such as renewable energy, EVs, and semiconductors.

Several metal stocks have benefited from the rally, including Hindustan Copper and NALCO, which rose 112% and 77%, respectively. However, analysts now believe that future returns will be driven by metal-specific fundamentals rather than a broad sector upcycle. Valuations already reflect expectations of favourable commodity prices and improving demand.

Antu Eapen Thomas, senior research analyst at Geojit Investments, noted that investors should favour companies that can protect margins, generate strong cash flows, and deliver consistent earnings growth. Vinit Bolinjkar, head of research at Ventura, also cautioned that stock selection and entry valuation are now critical.