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Supply side strains to keep non ferrous metal prices up

Metal News - Published on Thu, 28 Dec 2017

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Indian Express reported that after increasing up to 35 % in a year, global non ferrous metal prices will remain buoyant over the next three months as a result of the widening supply gaps. Rating agency ICRA in a report said that supply bottlenecks have kept international non-ferrous metal prices elevated in the current calendar year, which have increased 24-35 % in the past one year. The supply situations are unlikely to improve in the next three months.

ICRA said that “Consequently, the deficits are likely to persist, which, in turn, would keep prices elevated in the near term. While higher prices augers well for the manufacturers as an improvement in realisations on metal sales has helped non-ferrous metal entities register an improvement in business returns in the period from January to September 2017, the magnitude is limited by a simultaneous increase in input costs.”

While global aluminium production has witnessed a de growth in the past few months as a result of the regulatory steps taken in China to control production from polluting sources, copper and zinc outputs have suffered from issues in mine production and degradation in quality of ore, it said. The impact of rising input costs is higher for non-integrated players manufacturing aluminium, as there has been a sharp increase in alumina prices. As for the domestic demand-supply scenario, consumption of aluminium, copper and zinc, grew 7 to 9 % in the first half of the current financial year.

Despite this, domestic production remains in excess of consumption. The situation is likely to persist going forward as well, as domestic capacity is high and manufacturers are expected to operate the plants at a high asset utilisation level. This, in turn, would lead to large export volumes.

The report said that “Off take risks in the international market, however, would remain low, given the deficits in the global market and the cost competitiveness of the domestic manufacturers. A high proportion of export sales, however, would have an impact on margins, as typically export realisations are at a discount compared to domestic prices.”

ICRA expects growth in domestic non-ferrous metal consumption to remain healthy going forward, on the back of benign outlook on demand from non-ferrous metal-consuming sectors.

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Posted By : Rabi Wangkhem on Thu, 28 Dec 2017
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