Commodity Markets-Macro uncertainties led to corrections in aluminum, copper, zinc prices: Icra

Rating agency Icra Wednesday said macroeconomic uncertainties led to corrections in global prices of aluminum, copper, and zinc in the last one year. It further said that the production growth of these three non-ferrous metals was even lower than the rise in demand.

"Even though international prices of the three non-ferrous metals viz. aluminum, copper, and zinc have witnessed corrections of 20 percent, 13 percent, and 16 percent, respectively in the last one year, primarily due to macroeconomic uncertainties on the back of ongoing trade wars and other country-specific factors, the fundamental supply-demand balance suggests otherwise," Icra said in a statement. While global consumption growth of aluminum and copper during the first quarter of 2019 was muted at 1.4 percent and 0.8 percent, respectively, as against 4 percent and 2.3 percent, respectively, in 2018, consumption of zinc registered a de-growth of 1.3 percent as against 0.3 percent de-growth in the last year.

"Despite muted consumption levels, markets of the three key non-ferrous metals continued to remain in deficit in this period, with shortages, in fact, expanding on a Y-o-Y basis, as production growth was even lower than the growth in demand," it said. As per an Icra, the slowdown in production growth of aluminum and copper was, in turn, a result of capacity constraints, which is unlikely to improve significantly in 2019.

Production of zinc may improve in the second half of the year, which may bring the market back into a balance. "For the calendar year 2019, while deficits in the aluminum and copper markets are likely to expand, the zinc market is expected to be balanced. Consequently, the risk of a sharp correction in base metal prices from the current levels seems low in the near term purely based on fundamentals," said Jayanta Roy, Senior Vice-President, and Group Head, Corporate Sector Ratings, ICRA.