Aluminium deficit likely to widen on Chinese cutbacks: Icra

Ratings agency Icra today said it expects the deficit in global aluminium market to widen this year on the back of 4 million tonne fall in Chinese production due to regulatory issues.
The agency also said that non ferrous metal prices are currently buoyant after increasing by over 9-10 per cent in the last one-and-a-half month, and they are expected to hold steady at elevated levels during the rest of FY2017-18.
In its latest report, ICRA said it "expects the deficit in the global aluminium market to widen in 2017 as a result of at least 4 million metric tonnes (MMT) of capacity cutbacks in China, due to the recent regulatory developments in the country."

To cut pollution, China has directed closure of production facilities of aluminium smelters that have set up without necessary regulatory approvals. The step can result in 30 per cent fall in production in the winter months of November through March, Icra said.
Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, Icra said: "Despite the sharp increase in metal prices, operating profitability of the domestic primary non-ferrous industry is likely to be capped in FY2018 by cost pressure on some of the key inputs in production."
The impact of rising input costs is expected to be higher for the non-integrated players manufacturing aluminium, as there has been a sharp increase in prices of alumina, which is a large cost driver in production of the metal, Roy said.

As for the domestic demand-supply scenario, consumption of the three key non-ferrous metals viz aluminium, copper and zinc, registered 6-7 per cent growth across in Q1 FY2018.
While consumption of aluminium is expected to improve in the current financial year, surplus availability will persist, as domestic capacity is high and manufacturers are expected to operate the plants at a high asset utilisation level. This would lead to large export volumes.
Globally the demand for aluminium and zinc in CY2017 is expected to overshoot supply. For copper, demand supply is expected to remain in balance. Hence off-take risks of domestic exporters for all non ferrous metals would remain limited.