India Ratings (Ind-Ra) has revised its outlook for base metals to negative for FY2020-21, from the earlier stable. This outlook revision was made due to the recent COVID-19 outbreak and the ongoing US-China trade dispute.
Ind-Ra states that low global demand will pressure base metal prices. The agency also believes prices are likely to improve after the outbreak is contained and the second phase of the US-China trade deal concludes.
Ind-Ra states India will continue to be a net importer of copper in FY2020-21, as Vedanta’s smelter with an annual 400,000mt capacity stays shut.
According to the agency, Vedanta, Nalco and Hindalco will record consolidated revenue growth of 5.5-6pc from the prior year and EBITDA margins will be in the range of 18-19pc.
The outbreak of COVID-19 will lead to piling up inventories, which had declined in late 2019. Amidst the outbreak, zinc prices will be under pressure, but treatment and refining charges will be moderate. Zinc prices will go up after the COVID-19 situation comes under control. The market is expected to be in a marginal deficit over FY2020-21.
Copper: The outbreak has also pulled down copper prices. Treatment and refining charges, however, could be high due to limited smelters. Inventories will build-up for both refined copper and sulphuric acid (by-product), which would fall subsequently.
The agency expects aluminium prices to remain subdued on weak end-user demand and a supply surplus. India will also have to find newer sources for imports of alumina.