Weak Demand for Metals and Declining Prices Affect Domestic and International Market

Published Date : Sep 04, 2015

Indian metal producers had a tough March quarter. But June quarter proved worse than the previous quarter with sales dropping by 9.3%. In March, sales had dipped by 1%. But costs had declined too that had increased the profitability. 

The metal sector is facing slow demand across domestic as well as global market that has led to the decline in prices of the metals. Earnings growth has been affected too with high levels of debt taken to increase fund capacity. The circumstances under which new projects were conceived have now changed considerably. China’s economy has been shrinking with the shift in investment-driven growth model to consumption-led model. This shift has caused a decline in the demand for commodities that has created a slump in the metal markets. The slowdown in the Chinese economy has affected all other markets and regions across the world. 

However, there is some consolation with the decrease in demand for metals. Declining input costs have led to the decrease in the prices of metals such as coal and iron ore. The decline in material costs by 12.4% has bettered the gross margins. Rise in power and fuel costs has led to higher output owing to increase in capacities. But manufacturers have managed to decrease employee costs and other expenses. Manufacturers are looking for better efficiencies in manufacturing and further cost control. 

In the current quarter, metal prices have further declined. Copper smelting operations have fared well, as the profits depend on refining and treatment fees, which have been steady. However, the outlook for non-ferrous metals and steel does no look positive. Increasing imports of metals have hastened the slide in domestic prices.