IMFA is a backward integrated suppliers of Ferrochrome in India. It supplies Ferrochrome to Stainless steel producers like POSCO, JSL etc, with 90% of its production exported with 65% as long term contract and 35% sold in spot market.
Since Q2 last year, prices of Ferrochrome have been dropping on recessionary fears and higher interest rate environment. The stock started to recover towards end of 2023 on China recovery, which has not materialized in a big way so far. However, a good Q1 has given some push to the stock along with the expectation the input cost on coke is expected to go down over next couple of quarters because of old high price stick being consumed and new low price stock coming into paly. Any stimulus from China may result in higher Ferrochrome prices which are still above the pre pandemic low. Mgt commentary is FY24 is expected to be similar to FY23.
Overall like any commodity play this one is difficult to time, however with input cost expected to go down, any uptick in Ferrochrome prices should give the stock the impetus to move up.
Technically, 10WMA>30WMA>40WMA and 10WMA has started to rise. Huge vol can be seen in last 1.5 months and especially on Jul 26. Potential resistance and targets have been marked by red line.
Disclaimer: No position, posted only for academic purpose and a way to understand dynamics of Commodity plays. May take a position based on news out of China and how Ferrochrome prices pan out globally and in East Asia.
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