Base metals, the hardest beaten commodities last year, seem to have bounced off their near term lows. While the gloomy global economic
scenario hasn't altered to bring a breather to industrial metals, the recent price action indicates they might be off their multi year low for medium term.
From their January lows, international prices of these metals have rallied by a rage of 7% for metals like nickel and lead to 14% in case of copper. On MCX, prices rallied by a similar range as the rupee is trapped in a tight range from nearly a month.
According to Praveen Singh, research analyst at Sharekhan Commodities, news reports that China's State Reserve Bureau has started buying copper from domestic bonded warehouses and the overseas market in order to build up reserves at attractive lower prices has added to the buying buoyancy.
While speculations over a second US stimulus package of $780 billion are mounting, bargain buying at prices which are at multi year lows could provide a strong support for all industrial metals.
"While there is no major shift in the global recession outlook, the same seem to have been discounted in last year's historical fall of nearly 60-80% in the prices of these metals," said Harish Gallipeli, research head, Karvy Comtrade.
Before demand could shrink considerably, expectations of a decline in demand pushed prices below the cost of production in certain metals like nickel and zinc.
"Last week certain data releases from US like ISM manufacturing index as well as pending home sales showed some steady numbers after months of continuous decline. This has added to the momentum of rise," added Gallipeli.
Meanwhile, the inventories of most of these metals on London Metals Exchange continue to be at multi year high, indicating that the market continues to expect a cap on prices due to lower demand in coming months.
