The ongoing trade war between economies has impacted the consumption growth of non-ferrous metals such as aluminium and copper worldwide, a report said on Thursday.
Non-ferrous metals, which do not contain iron, are usually more corrosion-resistant than ferrous metals and are used in aircraft and other applications.
"Macro-economic uncertainties as well as weaker sentiments due to the ongoing trade wars have led to slowdowns in global consumption growths of aluminium and copper at 1.1 per cent and 0.5 per cent, respectively during first half of 2019, from 4 per cent and 2.3 per cent growth registered in calendar year 2018," the report by Icra said.
During the said period, the consumption growth of zinc at 0.2 per cent was a turnaround from the de-growth registered in the last calendar year, the ratings agency said.
It also said the slowdown in production growth of aluminium and copper was in turn a result of capacity constraint, which is unlikely to improve significantly in 2019.
However, production of zinc is likely to improve in the second half of the year.
"Non-remunerative prices, coupled with supply side disruptions as well as capacity constraints have impacted non-ferrous metal production globally," Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA said.
The global aluminium market has remained at a deficit, varying from 0.07-1.01 million tonne for the last nine quarters, because of capacity cutbacks in China. Copper and zinc markets have also remained in deficit in the last five quarters.
The period of deficits in the international copper market coincides with the closure of copper plant of Vedanta in Tuticorin, it added.
"The global copper deficit during April 2018 to March 2019 was 0.6 million tonne indicating that the Tuticorin smelter closure contributed around 66 per cent to the global copper deficit," Roy said.
The report further said the impact of the shutdown of Vedanta's complex has resulted in a shortage of copper in India. The deficit in copper, which was at 39 per cent of consumption, is likely to expand to 43-45 per cent in 2019-20.
Consequently, India has turned into a net importer of refined copper in 2018-19 from being a net exporter till 2017-18, it said adding however, the country remains a net exporter of aluminium and zinc as domestic capacities are higher than demand, and manufacturers operate the plants at high asset utilisation levels.
According to Icra, domestic demand for non-ferrous metals in 2019-20 is likely to be impacted by the slowdown in the automobile and construction sectors.
Consequently, consumption growths of aluminium, copper and zinc are likely to be muted at 3-5 per cent, which is a slowdown from the earlier expectations of 6-7 per cent growth rates, it said.
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