Base metal prices ended lower, with aluminium being the top loser on concerns that supplies might be tight only in the near term as large part of the inventory is believed to be locked up in financing deals.
The economic data from US played the spoil sport with initial jobless claims increasing and Philadelphia Fed manufacturing activity contracting sharply as against expectation of expansion by 7%.
Weak economic data pushed the US equity markets lower by nearly 1.5%. Taking cues, most of the Asian equities have opened in red with losses of nearly 1%. In the morning session on LME, all the base metals are trading lower. Dollar index is trading slightly on the higher side.
On the economic data front, there are no major data releases today. On the fundamental front, Jiangxi Copper Co, China’s top copper producer, will build a new copper plant in Guangdong with a capacity of 400,000 tonnes per annum. Also China may ban copper producers who violate environment rules for two years.
This is on the back of recent industrial accidents which led to waste spilling into rivers and seas. Overall, we at KCTL, expect the base metal prices to trade lower as weak economic data from US, especially the manufacturing activity data continue to weigh on prices.
ALUMINIUM
LME inventory declined by 5,100 tonnes, after witnessing build-up of 91,800 tonnes in the past two days
On the fundamental front, National Aluminium Co Ltd (NALCO), one of India’s state run companies, has issued a tender to export 3,000 tonnes of aluminium ingots
The basis on LME continue to remain at lower levels indicating that price rise, if any, in the near term is capped
COPPER
Copper inventory witnessed a modest build-up of 225 tonnes
China may ban Copper producers who violate environment rules for two years. This is on the back of recent industrial accidents which led to waste spilling into rivers and seas
On the fundamental front, Jiangxi Copper Co, China’s top copper producer, will build a new copper plant in Guangdong with a capacity of 400,000 tonnes per annum
LEAD
LME inventory for Lead witnessed a modest build-up of 25 tonnes, third consecutive build-up
The cancelled ratio which has fallen from close to 7% to less than 2% has bounced back strongly indicating that the build-up might end soon (see accompanying chart)
On the fundamental front, in India, Hindustan Zinc raised lead prices by 0.9% to 114,300/ton
NICKEL
LME inventory for Nickel declined by 300 tonne, third consecutive fall
The cancelled warrant ratio on LME declined sharply indicating that the stocks might increase in the near term.
This is also supported by the fact that the demand for Nickel from China might decline as steel mills there are curbing output
ZINC
LME inventory for Zinc witnessed draw-down of modest 50 tonnes
On MCX, the open interest continues to rise along with the fall in price indicating build-up of short positions
Both the basis on LME and calendar spread on MCX continues to remain at average levels, indicating no major expectation on either direction
