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Metal prices fall from April highs, but volatility sticky

Analysts say though some correction was due after the rally caused by the geopolitical turbulence, metal prices are likely to remain somewhat elevated through the current year, amid high volatility.

steel industry
In India, steel prices are dependent on the landed cost of imports, while prices for other metals are mostly linked to LME prices.

Global prices of base metals have fallen 9-17% since April from highly-elevated levels, providing some comfort to user industries in India, which have seen sharp spikes in input prices in tandem with the world trend. However, some metals like copper and aluminium have of late turned volatile again.

Analysts say though some correction was due after the rally caused by the geopolitical turbulence, metal prices are likely to remain somewhat elevated through the current year, amid high volatility.

Between April 11 and May 10, aluminium prices have fallen by 15% on the LME, copper by 9% and zinc by 17%. The domestic price of hot-rolled coil (HRC) of steel in China also fell 15%.

But since then, prices have staged some recovery. As on June 10, zinc prices on the LME are up by 3% and copper by 2% though aluminium prices continued to slide a bit. China’s domestic HRC prices are up 11% from the level a month ago.

In India, steel prices are dependent on the landed cost of imports, while prices for other metals are mostly linked to LME prices. Pricing powers of metal companies may come under some pressure.

In the Indian markets, in the month till June 13, Tata Steel stocks were down by 10%, Hindalco by 6%, Hindustan Zinc 1.5%, but Hindustan Copper stocks were by up 5%.

In a report last week, Moody’s Investor Services said, “Prices for copper, zinc, nickel and aluminium reflect low inventories and supply risk related to Russia. Supply, which was tight even before disruptions from the military conflict, will remain constrained.”

“We expect prices and earnings before interest, taxes, depreciation and amortisation (EBITDA) to remain historically high. The aggregate EBITDA decline will be driven by steel (non-US) and iron ore producers as their earnings are decreasing from unsustainably high levels because of high energy and input costs. EBITDA will rise for other commodity producers, supported by continued high prices,” said Barbara Mattos, senior vice-president, Moody’s Investors Service.

Icra’s Jayanta Roy also said, “Price volatility to prevail in the international market with gradual downward bias. Given high inflation prompting central bankers to raise interest rates, there are clouds on economic prospect across the world which will adversely impact demand for metals and in turn, prices.”

In a May 30 interview with FE, JSW Steel’s joint MD & group CFO MVS Seshagiri Rao said, “The steel prices have corrected more than 10-12%. Unless cost pressure comes down, don’t expect steel prices to correct significantly from the current levels because steel companies will not be able to make money.”

Rahul Sharma, director – India at International Zinc Association (IZA,) said prices of zinc might remain at the current level.

In April, the International Lead and Zinc Study Group said that after rising by 4.1% in 2021, global demand for refined lead is anticipated to rise by 1.7% in 2022 to 12.42 million tonne (mt). Similarly, global demand for refined zinc is expected to go up by 1.6% to 14.26 mt in 2022. It rose by 5.1% in 2021.

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