Weak earnings likely for base metal players in near-term: Icra

New Delhi: The earnings of primary base metal industry are expected to remain weak in the near-term, mainly on high energy cost and range-bound market rates, according to Icra. While better coal linkage availability would provide some respite, the margins would remain significantly lower than the levels seen in FY22, the ratings agency said in its latest report. Icra expects the "primary base metal industry's earnings to weaken significantly in FY23 and remain so in the near-term, owing to stubbornly high energy costs and range-bound metal prices," it said.

The list of base metals includes aluminium, copper, nickel, tin, lead and zinc. "The operating margins of domestic base metal entities are estimated to weaken significantly by around 10 percentage points in FY23, owing to the double whammy of metal price corrections and elevated coal costs. "Consequently, the operating margin of domestic entities is expected to remain range-bound at 19-20 per cent in FY24," Jayanta Roy, Senior Vice-President and Group Head - Corporate Sector Ratings, Icra, said.

The metal prices witnessed significant headwinds during Q2FY23 and Q3FY23 given an uncertain global economic outlook and demand slowdown in China. "The global demand outlook of base metals remains uncertain and would hinge on the housing sector recovery in China and improvement in global sentiments," Roy said.