Rating agency Icra Wednesday said macroeconomic uncertainties led to corrections in global prices of aluminium, 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. aluminium, copper and zinc have witnessed corrections of 20 per cent, 13 per cent and 16 per cent, 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 aluminium and copper during the first quarter of 2019 was muted at 1.4 per cent and 0.8 per cent, respectively, as against 4 per cent and 2.3 per cent, respectively, in 2018, consumption of zinc registered a de-growth of 1.3 per cent as against 0.3 per cent 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 aluminium 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 aluminium 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.
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