COVID-19 Impact Continues: ICRA fears aluminium consumption to decline by 8% in the current calendar year

Rating agency ICRA fears that consumption of non-ferrous metals, including aluminium, will shrink significantly this year as a consequence of the COVID-19 pandemic. According to the agency, the pandemic has taken a severe toll on the global automobile, construction, and electrical machinery industries, which together contributes 75 to 85 per cent to the global non-ferrous metal demand.

ICRA expects the consumption of these metals to contract significantly in the current calendar year. While aluminium consumption is estimated to drop by 8 per cent year-on-year, copper and zinc to decline by 3 to 4 per cent. But it is to be noted, the prices of these three non-ferrous metals strengthened sharply in the last five months.

The extent of recovery has, however, varied factoring in the evolving demand-supply dynamics of the respective metal. As the demand for aluminium is the worst impacted among the three, its international prices are down by 2 per cent year-on-year at the present.

The pandemic has not only affected metal consumption but also disrupted mining activities, said Icra. In fact, the current upward trend in prices is a result of the disruption in metal supplies.

"The near-term outlook of global economy is adverse as the number of new COVID-19 cases remains high, and recurring outbreaks have been reported in many countries. Consequently, demand outlook of these metals too is negative, and sustainability of prices at current levels is doubtful purely based on fundamentals," Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA said.