India Ratings revises outlook for base metals sector to stable

ET Bureau|
Feb 22, 2018, 07.44 PM IST
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zinc-think
FY19 is likely to witness new capacity additions and resumption of idled zinc mining capacities.
KOLKATA: India Ratings and Research (Ind-Ra) has revised the outlook for the base metals sector to stable for FY19 from negative in FY18. Within the sector, Ind-Ra revised the outlook for aluminium to stable from negative and zinc to stable from positive.

Ind-Ra expects the domestic market to remain in surplus as well with recently added capacities and competition from imports. While a part of this surplus is tipped to get absorbed in the global markets through exports, the premiums are expected to be under pressure owing to export market competition, amid slowing aluminium demand in China. It factors in a restraint in supply from China which is poised to balance demand-supply at a global level.

In copper, the agency said it expects a moderation of prices to about $6,000 per tonne for FY19 as China undertakes meaningful capacity additions during the year. However, copper prices may inch up higher towards the end of the year on the back of deficit in copper concentrate market, Ind-Ra said. For Indian smelters, treatment and margins for refining charges are likely to be under pressure in FY19, following about a 10% drop in Chinese benchmark treatment and refining charges for 2018, the agency said.

FY19 is likely to witness new capacity additions and resumption of idled zinc mining capacities. While current prices continue to remain strong, this may have a tapering impact on the base metal prices that have risen significantly through FY18. Hindustan Zinc could see an increase in production during FY19 following capacity ramp up. While prices are expected to remain firm for most part of the year, pressure on margins will ease with moderation in prices of key inputs, including metallurgical and thermal coal, the Ind-Ra report said.
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