Non-ferrous industry earnings to remain under pressure in FY24: Icra

Earnings of domestic non-ferrous metal industry players remain under pressure in the ongoing fiscal amid weak demand, according to Icra.

Due to global macroeconomic uncertainties and weaker-than-earlier expected recovery in Chinese demand, international prices of the three non-ferrous metals viz. aluminium, copper and zinc fell by 11 per cent, 8 per cent and 30 per cent, respectively, in the last six months, the rating agency said in a report.

"The earnings of the industry would remain under pressure in FY2024, after a lacklustre performance in the last fiscal. Significant metal price corrections remain the key headwind affecting the margins, with no immediate relief in sight," it said.

The moderation in earnings, combined with the committed expansion plans of the players, is expected to increase the industry's leverage in FY2024. However, the debt protection metrics remain adequate in the base case scenario and, therefore, ICRA maintains a stable outlook on the sector.

Global consumption growth of these metals registered a slowdown in the first half of CY2023 and, going forward, growth is expected to remain muted in the current calendar year as well.

Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA, said: "Weak macroeconomic outlook impacting global demand has so far weighed on non-ferrous metal prices. In addition, global metal supply shows signs of improvement, primarily in China, which is likely to result in a surplus metal balance for CY2023.

"Consequently, non-ferrous metal prices are expected to remain under pressure in the near term at least, and any improvement would hinge on a stronger recovery in Chinese demand and improvement in global sentiments.