Non-ferrous metals: ICRA revises the outlook for the non-ferrous metals sector from stable to positive

The rating agency revised its outlook for the non-ferrous metals sector from positive to stable due to robust prices and improving demand despite short-term concern over coal availability and rising costs production for non-ferrous metal companies.

“Given the continued rise in profits, a forecast of 6-7% demand growth in fiscal 2022, and balance sheet deleveraging supported by sound accruals, the outlook for the industry has been revised from positive to stable, ”said Jayanta Roy, senior vice president, corporate sector. Evaluations, ICRA.

Roy added that the credit metrics of companies in the CIFAR sample are expected to experience significant improvement with a projected total debt / OPBDITA of 1.2 times and interest coverage of 8.7 times over the course of the year. fiscal year 2022 compared to total debt / OPBDITA of 2.2 times and interest coverage of 5.2 times in fiscal year 2021.

Non-ferrous metals include aluminum, copper, and zinc. Improving demand in the market, especially in China, saw the prices of base metals (aluminum, copper and zinc) increase by more than 34 to 56% 1 on an annual basis during the calendar year In progress.

“The electricity crisis in China and the resulting surge in energy costs have forced many producers to cut back on production, further supporting prices in recent weeks. In the first half of October 2021, prices further improved by around 11-26% 1 from the end of September 2021, ”ICRA said in a press release on Wednesday.

Despite healthy growth in domestic demand, aluminum and zinc production still exceeds consumption, ICRA noted.

“The situation is also expected to persist in the future, as the domestic capacity is high and manufacturers are expected to operate the factories at a high level of utilization. This, in turn, would lead to significant export volumes, ”the ICRA note says.

In the copper sector, the decline in production created a large deficit in the domestic copper market, leading to significant imports.

“… The situation is unlikely to improve in the short term … soaring electricity prices are expected to dampen supply, while stocks available on the London Metal Exchange (LME) are also low. the lowest levels in recent times, ”ICRA said.

However, with an expected slowdown in imports into China, ICRA estimates a contraction in Chinese consumption apparent in H2 CY2021. As a result, the global copper market is expected to remain slightly in surplus throughout the year.

“The sustained price levels also prompted higher metal production from both new facilities as well as facilities that were closed / downsized during the pandemic and earlier… base metals players,” Roy added. .


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