Two iron ore majors announce $10 billion capex plans. Should you invest?

Cyclical investors, it might be your time to shine! NMDC and Lloyds Metals , two major iron ore producers, recently announced grand capex plans to capitalise on the current upcycle in the steel industry. NMDC, the iron ore producing PSU, will invest a staggering Rs 50,000 crore over the next five years to double its production capacity. Lloyds Metals has set aside Rs 33,000 crore for the same purpose. The $10 billion plan How the two giants plan to grow their production capacity NMDC Lloyds Current Capacity (MTPA) 50 10 Projected 5Y Capex (Rs cr) 50,000 33,000 Projected capacity by 2030-31 (MTPA) 100 25 Note: The capacity numbers are mentioned for iron ore Note that the combined capital expenditure of these two companies over the last ten years was just over 20,000 crore! But are these plans enough to warrant an investment? To answer that, we must explore why they are investing such large amounts now. Riding on the India wave In the past few years, the Indian government has gone on a capex spree to improve infrastructure, leading to unprecedented domestic demand for steel. In fact, steel consumption in India rose 30 per cent in the last five years, whereas most developed economies witnessed a decline.