Rating agency ICRA NSE 0.40 % has revised its non-ferrous metals sector outlook to positive from stable on the back of robust prices and improving demand despite a near-term concern of coal availability and increased cost of production for the non-ferrous metal companies.
“Given the continued earnings surge, an expectation of 6-7% demand growth in FY2022 and deleveraging of balance sheets supported by healthy accruals, the industry outlook has been revised to positive from stable,” said Jayanta Roy, Senior Vice-President Corporate Sector Ratings, ICRA.
Roy added that the credit metrics of the companies in ICRA’s sample set are expected to witness a significant improvement with a projected total Debt/OPBDITA of 1.2 times and interest cover of 8.7 times du ..
Non-ferrous metals include Aluminium, Copper and Zinc. Improved demand in the market especially in China, saw base metals (aluminium, copper and zinc) prices increasing by over 34-56%1 on a Y-o-Y basis in the current calendar year.
“The power crisis in China and the resultant surging energy cost has forced many producers to curtail output, further supporting prices in recent weeks. In the first fortnight of October 2021, the prices have further improved by ~11-26%1 compared to end September 2021,” ICRA said in a press release on Wednesday.
Despite the healthy growth in domestic demand, production of aluminium and zinc remains in excess of consumption, ICRA noted.
“The situation is likely to persist going forward as well, as domestic capacity is high, and manufacturers are expected to operate the plants at a high utilisation level. This, in turn, would lead to large export volumes,” ICRA’s note said.
In the copper sector, lower production has created a large deficit in the domestic copper market, resulting in larg ..