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Ind-Ra Revises Base Metals Outlook to Negative The 21st China (Guangzhou) Int’l Plate metal, Bar, wire, Metal Processing &Setting Equipment Exhibition
3/16/2020 金屬板材展-棒材-線材展 -plate metal expo-wire expo |
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India Ratings and Research has revised its outlook on the base metals sector to negative for FY21 from stable. The coronavirus outbreak, continuing US-China trade dispute and subdued global demand would keep base metal prices low in the near term. The prices may gradually improve as the epidemic is contained and the second phase of US-China trade negotiations is concluded. As part of its study, the agency has covered the copper, zinc, aluminium and coal sectors.
Ind-Ra however has maintained a Stable Outlook for FY21 on the key rated sector entities, given the majority of them have an adequate liquidity position, strong financial flexibility, a low-cost position and a dominant market position. The key sector participants include Vedanta Limited (‘IND AA’/Negative), National Aluminium Company Limited (‘IND AAA’/Stable) and Hindalco Industries Limited. Ind-Ra expects the entities to record, on a consolidated basis, revenue growth of 5.5%-6% yoy, EBITDA margins in the range of 18%-19% and a steady net leverage at around 3x in FY21.
Zinc: The outbreak of coronavirus shall result in a temporary zinc inventory pile up, as against the low levels at end-2019. Until the containment of the epidemic, zinc prices will be low and treatment charges and refining charges will moderate; and both with gradually reverse as the impact of the epidemic reduces. The zinc market is expected to be in marginal deficit over FY21.
Copper: Copper prices also will be low due to the coronavirus outbreak, and will be supported once the epidemic is contained. Treatment charges and refining charges shall be high during this period due to limited smelter availability due to higher inventories of both refined copper and sulphuric acid (by-product) and would subsequently fall. From a domestic standpoint, India shall continue to be a net importer of copper in FY21, pending the resumption of Vedanta’s 400,000TPA copper smelting facility.
Aluminium: The agency expects aluminium prices to experience downward pressure, due to a weak-end user demand and surplus market supply, despite Chinese environmental constraints. The heightened US-China trade tensions or a surge in Chinese production in 2020 upon the containment of coronavirus may trigger the prices to dive down further. India is dependent on imports of alumina and will have to find newer sources.
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