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The rating agency ICRA in its latest report has said that non-ferrous metal prices have witnessed a strong recovery of around 13-17% during April-May 2024 over the corresponding period in the previous year. The three-month rolling forward contract is also trading higher than spot metal prices, suggesting prices will remain healthy in the coming 1-2 quarters. While the downside risks to metal prices, particularly in H2 FY2025, cannot be ruled out, the current uptrend in metal prices is likely to result in an around 8-9% growth in realisation for the full fiscal. 

According to the report, globally, a revival in manufacturing activities, primarily in the Chinese market, as demonstrated by expansion (>50) in the purchasing managers index (PMI) data in March and April 2024, along with easing global inflationary concerns has supported the overall sentiments. Chinese demand for non-ferrous metals remains healthy primarily in the renewables and electric vehicle (EV) segments, thus supporting the global demand and offsetting the subpar demand growth in the US and European markets to an extent. In the US, while the manufacturing PMI expanded in March 2024, it again slipped in contraction during April 2024. Manufacturing in Europe continues to remain weak for the past two years. Consequently, global demand (ex-China) is likely to remain subdued in CY2024.

On the supply side, it said the production of refined copper is expected to remain tight owing to expected supply cut by Chinese smelters amid decline in the smelter’s margins. In addition, the US and UK recently implemented new sanctions on Russian metals, including on aluminium and copper, thus increasing supply bottlenecks in the near term at least. Consequently, the current supply-demand dynamics remain supportive of firm metal prices in the near-term.

The report further stated that with input costs remaining largely under check along with healthy growth in realisation, the operating margins of domestic entities are estimated to remain strong at around 23% in FY2025 over around 17% in FY2024. The credit metrics are also expected to improve with a projected total Debt/OPBDITA of 1.8 times and an interest cover of 6.0 times in FY2025 over a total Debt/ OPBDITA of 2.0 times and an interest cover of 4.5 times in FY2024.