BIZ-STUDY-METAL

The global non-ferrous metal

prices which witnessed a correction in the last five months

due to concern over the trade war between the US and China,

are unlikely to correct significantly here onwards, a

report said.

According to the rating agency Icra, the demand

supply fundamentals, would not justify any further major

correction, as the global market of these metals are currently

in deficit.

"In the full calendar year 2018, the aluminium,

copper and zinc markets have remained in deficit.

Consequently, the risk of a further downside in base metal

prices seems low in the near term," Icra president Jayanta

Roy said.

The agency said the global aluminium market has

remained in deficit for the last six quarters because of

capacity cut backs in China.

However, production in China is estimated to have

increased in the last six months and the trend may continue,

going forward, with new capacities coming on stream.

"Notwithstanding higher production, global aluminium

market was in deficit in Q3 CY2018. Moreover, for the current

winter months, the decision on the extent of production cuts

under the revised pollution control norms in China has been

decentralised to the provincial governments," it said.

However, the government has brought more provinces

under the norms, thus effectively mandating more smelters to

abide by the production curtailment norms during the months

from November to March.

"The effectiveness of the controls on Chinese

production and therefore the global demand-supply position

would determine the trajectory of aluminium prices over the

coming quarters," the report said.

The global zinc market is currently in a deficit after

remaining in surplus in the first few months of this

calendar year.

The copper market, which had been in a marginal

surplus of 1.2 lakh metric tonne in the first three months,

was also in a large deficit in the next six months, impacted

by the closure of 4 lakh metric tonne copper plant of Vedanta

in Tuticorin.

"The deficit is likely to support international copper

prices, notwithstanding temporary fluctuations typical of

internationally traded commodities.

In the domestic market, the sharp depreciation of the

rupee against the US dollar has provided an additional support

to base metal prices, as realisation in the Indian market is

determined on an import parity basis," the agency said.