The outlook on long-term demand for base metals in India remains positive driven by investments in infrastructure projects, rating agency Icra has said.
The agency said that investment in infrastructure projects for the power transmission and distribution sector, urban housing and smart city programmes of the government would drive demand for metals in long term.
Icra said that the apparent growth in consumption of aluminium, copper and zinc remained healthy at 10 per cent, 8 per cent and 7 per cent, respectively, in the first nine months of FY2017 on account of demand from power transmission and distribution, and automobile sectors.
Growth in domestic apparent primary aluminium consumption witnessed a slowdown in the third quarter of FY2017 as a result of the usage of downstream products, which had accumulated during the first six months of the financial year, the rating agency said.
Icra also said that it expects the deficit in the global aluminium market to widen further this year due to almost 3 million ton production cutbacks in China post the imposition of a new air pollution control regime in Beijing.
"On the other hand, the gap in the zinc market is expected to remain at the level of CY2016 and the copper market is likely to remain more or less balanced in CY2017," it said.
"While the outlook on international aluminium prices is favourable, zinc and copper prices are unlikely to increase significantly from the current levels," Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, Icra said.
Non-ferrous metal prices had strengthened steadily earlier in 2016 as a result of the deficits in the global demand-supply balances, apart from some positive sentiment on China's overall demand scenario.
"During CY2016, aluminium prices strengthened by 17 per cent and went up further by 12 per cent in the last three months as the news on the new regime was released. Similarly, copper and zinc prices also strengthened by 18 per cent and 65 per cent respectively in CY2016, but the growth slowed to 4 per cent and 9 per cent respectively in the last three months," it said.
Nevertheless, improved manufacturing PMIs of the major economies is a positive for global non-ferrous metal demand, going forward.
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