Global non-ferrous metal prices are likely to remain elevated due to various issues ranging from trade sanctions, plant closures, and gradual degradation of ore quality – all of which would contribute to keep metal supplies constrained, says an ICRA report.
The aluminium market has remained in deficits in the last four quarters because of capacity cut backs in China. While production in China is estimated to have increased in the current quarter, after the expiry of the winter production control norm in March, supply prospects worsened further when the United States
Commenting on the situation, Mr. Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA Ltd said: “If the decision on the sanction, which becomes effective from October this year, is not reversed, international aluminium prices may strengthen once again in the coming months.”
On the other hand, the global zinc market turned surplus in the first few months of this calendar year, because of a turnaround in refined metal production. The situation, however, is expected to reverse soon as mine production is reducing, this would result in lower metal production subsequently. The deficits expected in the second half of 2018 would keep international zinc and copper prices firm. The weakness of the rupee against the US dollar would provide an additional support to domestic prices, as realisation in Indian market is determined on an import parity basis.
The impact of the shutdown of Vedanta’s copper complex is expected to be higher in the domestic market, which is expected to slip into a deficit from a surplus situation. As a result, local downstream copper product manufacturers would be adversely impacted due to lack of adequate primary metal in the market. Additionally, Indian premium for import of copper may harden, leading to firmer domestic prices.
On the other hand, an excess supply situation in domestic aluminium and zinc is likely to persist as domestic capacity is high and manufacturers are expected to operate the plants at a high asset utilisation levels. This in turn would lead to large export volumes. Off-take risks in the international market, however, would remain low, given the expected deficits in the global market and the cost competitiveness of the domestic manufacturers.