Aluminium, copper prices to remain flat in near term: ICRA

Ratings agency ICRA today said it maintains the outlook for a range bound movement in aluminium and copper prices, hovering around their current levels in the near term.

"Moreover, the upward movement in zinc prices, witnessed in the last six months or so, is also likely to flatten and remain at around its current level at least over the next three months or so," it said in a statement.

Post witnessing record low levels in the second half of fiscal 2016 (H2 2015-16), international prices of aluminium, copper and zinc have strengthened in the current fiscal, it added.

While aluminium and copper prices quoted at London Metal Exchange (LME) have strengthened by around 15 per cent and about 10 per cent, respectively from their respective lows, increase in the price of zinc has been much sharper, at about 56 per cent, it said.

Global markets of non-ferrous metals have remained in deficits in the current calendar year so far, ICRA Ratings Senior VP Jayanta Roy said.

"Although consumption growth of non-ferrous metals in the global market remained muted, there has been greater producer discipline internationally, leading to the continuing deficits in base metals, supporting their prices," he added.

ICRA estimates that average global capacity utilisation of aluminium and copper producers at present would be at around 80 per cent.

Hence, any significant rise in prices from the current levels may incentivise manufacturers to increase production, resulting in the markets turning into a surplus from the current deficits, it said.

Such demand-supply swings would keep global non-ferrous metal prices range bound in the near term, hovering around their existing levels, the agency added.

On the domestic front, apparent growth in consumption for aluminium, copper and zinc remained healthy in June quarter of 2016-17 fiscal 2017 at about 25 per cent, 10 per cent and 13 per cent, respectively on account of robust demand from the power transmission and distribution and automobile sectors.

"However, in ICRA's opinion, actual growth in consumption of these metals, particularly aluminium, is unlikely to be as high as the number mentioned. There has been a significant build-up of aluminium inventory in the country in the last few months," it said.

Consequently, apparent growth would moderate in the next few quarters, as this large inventory gets used up over time.

"Nevertheless, ICRA's outlook on long-term demand of base metals in India remains positive, driven by investments in infrastructure projects in power transmission and distribution sector, urban housing and smart city programmes," it added.