The commodity super cycle may have topped out for steel, but prices are expected to trend up for metals like aluminium, copper and zinc, industry executives and sector experts said.
Anil Agarwal, the chairman of Vedanta Group with major manufacturing interests in aluminium, zinc and copper, told ET in an interview that copper and aluminium were still in demand, with prices rallying on the London Metal Exchange (LME), a leading futures and forwards market for metals.
Spot prices of aluminium peaked at around $4,000 per tonne on the LME in March before moderating to around $2,800. Prices were around $2,200 per tonne in March last year.
Similarly, spot prices for copper hit a high of about $10,700 a tonne in March compared to around $9,000 a year ago.
“Copper, zinc and cobalt are in short supply,” Agarwal said. “Demand is growing… Whether it is renewable energy, electric cars, batteries – you need these metals. There is five times more demand (than supply).”
The electric vehicle (EV) industry is primarily driving demand for these non-ferrous metals, said Satish Pai, managing director of Aditya Birla group-owned aluminium and copper producer Hindalco. An investor push towards sustainability is also aiding demand, he added.
Prices of aluminium and copper will remain robust as there is no significant new capacity addition on the cards, he said. “The fundamentals show that the LME (prices) should remain firm,” Pai said.
Steel prices had been falling even before the government decided last week to levy a 15% export duty, further increasing its local supply and reining in prices, said Dilip Oommen, chief executive of ArcelorMittal Nippon Steel India (AM/NS India).
“The demand has contracted globally. Secondly, to make matters worse, there are these export duties,” Oommen said. “Where will all the steel go? The industry will look at a reduction in output if it cannot find a home for this excess steel.”
Crisil Research said in a recent report that steel prices would soften during the monsoon, following a prolonged two-year rally.
“Lower global prices, coupled with weak demand, led to correction in steel prices in May. The present move (15% duty) will curb exports significantly, leading to further price corrections in the domestic market,” analysts at Crisil Research led by Hetal Gandhi wrote.
Producers of non-ferrous metals are lining up significant capital expenditure (capex) plans to increase capacity and are also lobbying for new mining leases.