Covid-19 outbreak: Non-ferrous metals slip on slow China demand

MUMBAI: The outbreak of Covid-19, or novel Coronavirus, has put pressure on non-ferrous metals aluminium and copper, with analysts forecasting a weak last quarter for Indian producers.Aluminium and copper prices have dropped nearly 5% since the outbreak on January 21, to trade at Rs 138.10 per kg and Rs 430.30, respectively, on the MCX as of Friday. Similarly, LME prices of aluminium fell to $1,676 per tonne on Friday from $1,810 on January 21, while copper slipped to $5,701 from $6,158 a tonne in the same period.“China being the major consumer of metals, the outbreak has put a stop to major manufacturing and import, which is likely to have a major effect on the entire supply chain, reducing demand from January to March,” said Akshay Agarwal, managing director, Acumen Capital, adding that the brokerage maintains a bearish outlook on the metals market overall.Companies are likely to take a hit on exports and see profit margins shrink due to falling prices, analysts said. The impact is, however, largely expected to be confined to the current quarter, as prices recover in medium term, they said.“Non-ferrous companies will continue to slide in Q4, with China battling Covid-19. Average aluminum price is down by $10, alumina by $7 and zinc by $101 on a quarterly basis, reflecting the continued weakness in the sector,” said senior research analyst Vishal Chandak of Emkay Global in a recent report.Hindalco Industries, the largest producer of aluminium and copper, said the outbreak has not hit numbers but may get affected by its purchase of US-based aluminium rolled products maker Aleris. “We have downgraded Hindalco from ‘buy’ to ‘hold,’ reflecting muted to lower aluminium prices and increasing likelihood of Aleris acquisition without automotive body sheet plants, which will make the acquisition value-expensive in the short run,” said the report. A lower premium on physical aluminium may impact Novelis’ profitability.

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