The global non-ferrous metal prices which witnessed a correction in the last five months due to concern over the trade war between the US and China, are unlikely to correct significantly here onwards, a report said.
According to the rating agency Icra, the demand supply fundamentals, would not justify any further major correction, as the global market of these metals are currently in deficit.
"In the full calendar year 2018, the aluminium, copper and zinc markets have remained in deficit. Consequently, the risk of a further downside in base metal prices seems low in the near term," Icra president Jayanta Roy said.
The agency said the global aluminium market has remained in deficit for the last six quarters because of capacity cut backs in China.
However, production in China is estimated to have increased in the last six months and the trend may continue, going forward, with new capacities coming on stream.
"Notwithstanding higher production, global aluminium market was in deficit in Q3 CY2018. Moreover, for the current winter months, the decision on the extent of production cuts under the revised pollution control norms in China has been decentralised to the provincial governments," it said.
However, the government has brought more provinces under the norms, thus effectively mandating more smelters to abide by the production curtailment norms during the months from November to March.
"The effectiveness of the controls on Chinese production and therefore the global demand-supply position would determine the trajectory of aluminium prices over the coming quarters," the report said.
The global zinc market is currently in a deficit after remaining in surplus in the first few months of this calendar year.
The copper market, which had been in a marginal surplus of 1.2 lakh metric tonne in the first three months, was also in a large deficit in the next six months, impacted by the closure of 4 lakh metric tonne copper plant of Vedanta in Tuticorin.
"The deficit is likely to support international copper prices, notwithstanding temporary fluctuations typical of internationally traded commodities.
In the domestic market, the sharp depreciation of the rupee against the US dollar has provided an additional support to base metal prices, as realisation in the Indian market is determined on an import parity basis," the agency said.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)