The global non-ferrous metal prices are likely to remain range bound in the coming quarter as a result of improvements in non-ferrous metal supply globally. Supply bottlenecks in the previous calendar year had resulted in a sharp increase in international non-ferrous metal prices, which strengthened by 24-35% during the year. As for global output of non-ferrous metals, while aluminium production witnessed a de-growth as a result of the regulatory steps taken in China to control production from “illegal” and polluting sources, copper and zinc outputs suffered from issues in mine production and degradation in quality of ore.
Commenting on the situation, Mr. Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA said: “The end of the restrictions on production in China during the winter months, would temporarily improve supply of aluminium in the global market. On the other hand, higher production from copper and zinc mines would result in balanced copper and zinc markets globally in the coming months.”
The improvement in aluminium supply is, however, likely to be temporary, as the restriction of aluminium production in China is likely to be implemented during the next winter months as well. Hence, overall production from the existing aluminium capacities in China in CY2018 would remain largely at a level as in CY2017, even as consumption in the country is likely to expand by ~8-9% on the back of healthy demand from the country’s automobile and construction sectors. ICRA expects ~3.5 MMT of new aluminium smelters to get commissioned mostly in China in this calendar year. Notwithstanding the incremental production from these capacities, the global aluminium deficit is likely to widen to ~2.5 MMT in CY2018 from ~1.4 MMT in CY2017 because of an expected healthy rate of growth in consumption.