Metals & Mining Sector Playbook
This playbook covers the Metals & Mining sector of the Indian stock market. Use it to understand how companies in this sector make money, what metrics matter...
Sector Overview
This playbook covers the Metals & Mining sector of the Indian stock market. Use it to understand how companies in this sector make money, what metrics matter most, and how to value them.
What you will learn
- Business Model: Integrated vs standalone, mining economics, value-added products
- Commodity Cycles: Steel, aluminium, copper cycles — demand drivers and global supply
- Cost Curves: Ore quality, energy costs, logistics, India's position on global cost curve
- China & Global Demand: China infrastructure spend, global trade flows, anti-dumping duties
- Valuation: EV/EBITDA through the cycle, replacement cost, reserve life multiples
Sub-industries in this sector
| Basic Industry | Playbook |
|---|---|
| Aluminium | View playbook |
| Copper | View playbook |
| Diversified Metals | View playbook |
| Ferro & Silica Manganese | View playbook |
| Industrial Minerals | View playbook |
| Iron & Steel | View playbook |
| Pig Iron | View playbook |
| Precious Metals | View playbook |
| Sponge Iron | View playbook |
| Trading - Metals | View playbook |
| Trading - Minerals | View playbook |
| Zinc | View playbook |
How to use this playbook
Start with the Business Model lesson to understand how companies in this sector generate revenue. Then move through metrics, risks, and valuation in sequence. Each lesson builds on the previous one.
1. Metals & Mining — Business Model
What you will learn
- How metal companies make money — from mining ore to selling finished products
- The integrated vs non-integrated model and why it matters for margins
- Steel, aluminium, copper, zinc — different economics for each metal
- Why India's metal sector is structurally advantaged (iron ore, coal access)
- Revenue formula: Volume × Realization, and what drives each
The metals value chain
India is the world's 2nd largest crude steel producer (140+ MTPA), 2nd in aluminium, and has significant zinc/lead operations. The sector represents ~2.5% of GDP.
Business models by metal
Steel — the dominant Indian metal
| Company | Model | Capacity (MTPA) | Revenue (FY24) | EBITDA/Tonne |
|---|---|---|---|---|
| Tata Steel (India) | Fully integrated (captive iron ore + coal) | 21 | ₹1,30,000 Cr | ₹12,000-15,000 |
| JSW Steel | Partially integrated (buys iron ore/coal) | 28 | ₹1,65,000 Cr | ₹9,000-12,000 |
| SAIL | Fully integrated (government-owned mines) | 20 | ₹1,00,000 Cr | ₹6,000-9,000 |
| Jindal Steel (JSPL) | Integrated (captive mines, power) | 10 | ₹50,000 Cr | ₹10,000-14,000 |
Aluminium
| Company | Model | Capacity (MTPA) | Revenue (FY24) | Cost Advantage |
|---|---|---|---|---|
| Hindalco (India ops) | Integrated (bauxite + captive power) | 1.3 | ₹60,000 Cr | Coal linkage for smelting power |
| Vedanta (aluminium) | Integrated (Odisha bauxite + power) | 2.3 | ₹45,000 Cr | Lowest-cost global producer |
| NALCO | Fully integrated (government) | 0.46 | ₹12,000 Cr | Captive bauxite + CPP |
Zinc & Copper
| Company | Metal | India Position | Global Rank | Key Advantage |
|---|---|---|---|---|
| Hindustan Zinc | Zinc + lead + silver | Near-monopoly (75% domestic share) | Top 5 global | Lowest-cost miner globally |
| Hindalco (Birla Copper) | Copper | Largest Indian smelter | - | Custom smelting model |
Integrated vs Non-Integrated
Integration = moat in metals
A fully integrated steel maker (captive iron ore + coal) has ₹4,000-6,000/tonne cost advantage over a non-integrated player. In down-cycles, this is the difference between profit and loss.
Revenue drivers for metal companies
Revenue = Volume shipped × Average Realization per tonne
| Driver | What Moves It | Frequency |
|---|---|---|
| Volume | Capacity utilization, maintenance shutdowns, ramp-up of new capacity | Quarterly |
| Realization | LME/CRU benchmark prices, product mix (commodity vs value-add), geography | Monthly |
| Product mix | Share of value-added products (CR vs HR, wire rod vs ingot) | Improves over capex cycles |
| Export vs domestic | Export at LME parity; domestic at premium/discount depending on supply | Market-driven |
Value-added product premium
| Metal | Commodity Product | Value-Added Product | Premium (₹/tonne) |
|---|---|---|---|
| Steel | HR Coil | CR Coil / Galvanized | ₹5,000-10,000 |
| Steel | HR Coil | Auto-grade sheets | ₹12,000-18,000 |
| Aluminium | Ingot | Flat-rolled products (FRP) | ₹20,000-40,000 |
| Copper | Cathode | Rods + wires | ₹15,000-25,000 |
Cost structure — what determines profitability
| Cost Component (Steel) | % of Total Cost | Key Driver |
|---|---|---|
| Iron ore | 25-30% | Captive vs purchased (₹1,500-4,000/T) |
| Coking coal | 30-35% | Imported from Australia ($200-350/T) |
| Power & fuel | 10-12% | Captive vs grid |
| Conversion cost | 10-15% | Efficiency, automation |
| Logistics | 5-8% | Proximity to port/customer |
Coking coal is the key variable
For Indian steel makers, coking coal (imported, priced in USD) is the largest uncontrollable cost. A $50/T swing in coking coal = ₹3,000-4,000/T impact on EBITDA.
Key metrics for metals business model
| Metric | What it tells you | Good | Red flag |
|---|---|---|---|
| EBITDA per tonne | Unit profitability | Top quartile globally | Below industry median for 3+ quarters |
| Capacity utilization | Operating leverage | >85% | <70% (demand issue or ramp delay) |
| Integration ratio | Cost control | >70% raw material self-sufficiency | Fully dependent on market purchase |
| Value-add share | Revenue quality | >30% (improving) | <15% (pure commodity play) |
| Net debt/EBITDA | Balance sheet health | <2× | >3.5× (dangerous in downcycles) |
Indian context
🗣️
"Metal sector mein sabse pehle samajho — yeh global commodity business hai. Price LME pe decide hota hai, India mein nahi. Lekin Indian advantage yeh hai ki iron ore captive hai, labour sasta hai, aur demand structurally grow kar rahi hai (infra + real estate). Isliye Indian steel companies globally competitive hain."
✅ Checklist
- ○I understand integrated vs non-integrated models and their margin impact
- ○I can identify the cost advantage of captive raw material access
- ○I know the value-add product premium by metal type
- ○I track EBITDA/tonne as the primary profitability metric
- ○I understand coking coal import dependency as the key risk
Key takeaway
Indian metal companies are globally competitive due to captive iron ore, low labour costs, and growing domestic demand. The business model question is simple: how integrated is the company (cost control) and what's the value-added product mix (realization uplift). Fully integrated players survive every cycle; non-integrated players are at the mercy of spreads.
2. Metals & Mining — Commodity Cycles
How metal commodity supercycles and minicycles work The 3 phases of a steel/aluminium cycle and where India is now Why metal stocks are bought on bad news an...
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3. Metals & Mining — Cost Curves
What a cost curve is and why it determines who survives downturns India's position on the global steel and aluminium cost curves How ore quality, energy, and...
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4. Metals & Mining — China & Global Demand
Why China consumes 50%+ of global metals and dictates prices India's domestic demand story — infra, housing, manufacturing How global trade flows and antidum...
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5. Metals & Mining — Valuation
Why P/E is useless for metal stocks and which metrics to use instead EV/EBITDA through the cycle — normalization methodology Replacement cost and reserve lif...
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