Prices of non-ferrous metals, i.e. metals except iron like aluminium, zinc and copper, have jumped around 12–15% in the current financial year so far, fuelled by China's manufacturing rebound.
ICRA Research expects this trend to continue due to favourable supply-demand dynamics, leading to an 8–9% rise in fiscal 2025 realisations. This stands to benefit players like Hindalco Industries Ltd., National Aluminium Co., Vedanta Ltd., Hindustan Copper Ltd. and Hindustan Zinc Ltd.
Aluminium
Aluminium prices on the London Metal Exchange have surged 12% year- on-year in the April–June period, driven by positive global cues. ICRA predicts this momentum to translate to a 7–8% increase in fiscal 2025 metal sales for domestic players.
Operating margins of companies could be further boosted by lower input costs of pet coke and caustic soda.
Higher aluminium prices benefit integrated players like Hindalco and Nalco, potentially boosting revenue and margin if production costs hold. Vedanta can also benefit from revenue gains. However, these firms rely on alumina for smelting.
Currently, alumina costs make up 20% of the aluminum price versus the historical 14% to 15% ratio. The price increase is due to disruptions in bauxite supply and refineries' operations globally. Therefore, it may negate some of the benefits of higher selling prices, according to ICRA.
Copper
Copper prices on the LME stood 13.6% higher on a year- on- year basis as of June 2024.
On the domestic front, copper prices remained range-bound at Rs 8,200–8,300 per kilogramme till February. However, prices have seen a sharp uptick since March amid production-cut expectations from Chinese smelters. These prices are likely to remain strong on the back of lower supply of refined copper in the near term, according to ICRA.
Hindustan Copper, which has a 66% market share in the Indian copper market, stands to benefit the most, being the only Indian miner of copper ore. Rising copper prices directly translate to higher revenue from selling mined copper and could support the profitability of the company.
Vedanta and Hindalco, which hold 23% and 10% market share respectively in the Indian copper industry, could also benefit. Vedanta does engage in the copper mining and processing business and higher copper prices could boost this segment's revenue.
While Hindalco does not mine copper itself, it is a major consumer of copper for its manufacturing operations. The benefit for Hindalco is indirect. The company could pass on the higher prices by increasing product prices, which could help improve margins. However, this also depends on the firm's ability to manage their own input costs.
Zinc
In line with the other non-ferrous metals, zinc prices have also improved in the first quarter of fiscal 2025. Prices as of June stood 20% higher on an annual basis.
While the downside risk in the second half of the current fiscal does remain across the non-ferrous metals, ICRA expects the full-year prices to be 7–8% higher compared to the previous fiscal.
Hindustan Zinc, which holds a 100% market share in the Indian zinc industry, is the only pure-play zinc producer listed on the Indian stock exchanges.
The company directly mines and refines zinc. Therefore, rising zinc prices lead to an increase in the company's revenue and could potentially improve its margins if production costs remain stable.
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