Falling metal prices paused for breath in October, raising hopes they might have hit the proverbial bottom. Those hopes were dashed as prices continued to fall and have reached multi-year lows. Data from the London Metal Exchange (LME) shows the price of copper has declined by 28.6% in 2015 so far, while that of zinc has fallen by 30.2% and aluminium by 21%. Chinese flat steel prices are down by 39.6%. November alone has seen declines ranging from 2.5% for aluminium to 12.2% for copper.

The resumption of the fall, especially if it continues in this vein, spells more trouble ahead for metal companies.

The problems remain the same but varying expectations about how much these can worsen before a recovery sets in are what keep moving prices up and down. The latest slide is being blamed on the strength of the dollar, which then leads to money moving away from commodities. Global economic conditions don’t inspire confidence that demand will improve any time soon either.

Copper use declined by around 2% till August, and if one excludes China, it declined by 4%, according to the International Copper Study Group.

Refined metal production has risen by 1.6% in this period. It means the seasonally adjusted refined metal balance has shifted to a surplus from a deficit last year. In zinc, refined metal output rose by 5.7% till September, but use rose by a mere 0.8%. These trends are not new; however, if metal prices are falling again, it’s an indication things could get worse.

A continued slump in metal prices clouds the outlook further for Indian metal companies. The September quarter was anyway a washout of sorts, chiefly due to lower realizations. Output growth has been supported by the government’s own push for investment-led growth but that has its limits. Falling realizations even as costs have not declined as much is affecting their performance.

The S&P BSE Metal index is down by 6.2% from a month ago, and by 34.7% so far in 2015. It seems enough punishment already for investors in these stocks. If metal prices keep falling in this fashion, the likely cut in earnings that will result could make it worse.

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