Published on : Jul 14, 2015
The uncertain economic development in China that accounts for around 40% of the consumption of key metals across the globe are likely to negatively affect the metals industry in India, reports a rating agency.
According to India Ratings and Research the economic developments in China will have a negative impact on the overall metals industry in India. It will also affect the sectors with an export focus.
The London Metal Exchange (LME) nickel prices have declined by 12%, while, China alumina prices have declined by 10 percent. Shanghai steel prices by 16.4%, copper prices by 5.6%, zinc prices by 7% and aluminum prices by 2.9%.
The base metals prices declined in the range of two to 21 percent in consideration to the soft demand scenario in China for the initial six months of the current year.
China’s coiled steel prices have slashed down by 21%. The London Metal Exchange copper metal prices declined by nine percent. The iron ore prices slashed down by 20% in June.
The steel sector in India said that the imports from China increased 18.4% y-o-y in the forecast period 2014-15 and the iron and steel imports increased among the top 10 imports from China. The Indian manufacturers are constantly striving with low capacity utilization. The fall in commodity prices is uncertain to benefit the margins of the manufacturing units in the short term.
The non-ferrous base metal industry in India commands a strong physical premium. The physical premium is bound to fall due to the sharp fall in metal import and metal prices from China.
The industry is likely to incur inventory loss if the metal prices do not recover in the short term. The loss is 2-5% fall in operating profits.
Indian manufacturers might face increased competitive pressure from the manufacturers in China.