EDITOR’S NOTE


Dawn of a new hope

The year that we bid adieu unfolded two major developments. One, the US elections which will shape the course of the global economy and here at home the government’s demonetization exercise striking at the very root of the black money component of the financial system. The dawn of the New Year will evolve around these mega events. 

In India there’s a dawn of a new hope for the economy under the leadership of the Modi-led government. From day one, the government has pursued a policy of reforms to usher in growth momentum which, can best be kept in motion by giving thrust to infrastructure development which, it has zealously followed triggering demand for metals. Iron & coal is expected to see a sizeable rise as implementation of infrastructure projects gathers steam. 

Metals industry, steel in particular, is riddled with challenges of cheap imports at questionable prices which cannot be wished away overnight. Unless we build up domestic capabilities to serve the expected rise in demand at quality and cost levels, huge surplus capacities in China, Japan and South Korea will continue to torment the domestic industry. Extending relief packages and other protective measures, will ameliorate the hardship the domestic industry is facing.

Global metal prices significantly increased towards the end of 2016 largely due to credit-fuelled construction boom that underpinned demand in China and the probability of US President Donald Trump’s announcement of a big push to infrastructure spending.

Among the global metals, steel prices ended the year 2016 with an increase of more than a third, in December, year-on-year, mainly because of a rapid rise in flat product values. In the year 2017, China’s significant supply disruptions of steel production will be a bullish factor for global steel pricing in the year ahead.

In base metals, the downside will be limited as production cuts and the expectations that, following the US, other developed economies too may opt for fiscal stimulus to boost economic growth, which will push demand for industrial metals.

Among the base metals, zinc was the top performer with over 60 per cent returns. It was followed by lead, nickel, copper and aluminium.  Zinc supply will be in deficit in 2017 too, making it six years in a row. Robust demand from automotive and industrial sectors is the prime reason for global lead consumption year-on-year (YoY) in both 2016 and 2017. Tightening copper concentrates supply is believed to be the main reason for the fall in spot treatment and drop in refining charges during 2017.

India’s potential as a huge investment destination in manufacturing, infrastructure and construction was never in doubt. It is only the failure to live up to this potential that makes us a still-developing-economy. Scaling up – both in quantity & quality will help realize the Make in India’ dream and emerge as a new dominant economic player. And as we usher in the New Year with renewed optimism, MMR wishes its esteemed readers and advertisers a bright and prosperous year ahead and seek your continued support.