Moody’s Investors Service in its latest report said that Indian base metal industry is expected to grow 8-10% annually for next three years on account of improved demand from three sectors which include power, construction and automotive. Further it said, “Our projections reflect domestic GDP growth and the government’s efforts to boost infrastructure spending'.
The report stated that India’s production capacity for all the three base metals- aluminum, copper and zinc is sufficient enough to meet the increased demand, which has increased over the past decade. It also expects that the profitability will increase for companies with captive raw material sources and adequate scale.
The report highlighted that, owing to the large expansion projects over the next three years, aluminum sector will become oversupplied. Hence to maintain the high utilization rates manufacturers will have to rely on exports. However the increased demand for copper and zinc will absorb some excess capacity.
Further Moody’s said that the cost structure of the Indian companies wrap them against the competitive threats. If the capacity utilization rates increase in response to the growing demand, they will become more cost efficient.