Base metal prices ended lower with losses of anywhere between one to two percent on the back of stronger dollar index and weak European equity markets. Copper imports to China fell to their lowest levels in nearly two years thereby raising concerns that the Chinese demand for the metal might remain tepid at higher prices. US equity markets ended lower by 0.2 percent. Most of the Asian equity markets are trading down with Shanghai-Chinese market leading with losses of more than 2.5 percent. Dollar index continues to add weight and is trading higher by 0.2 percent. This has sent the base metal prices lower in the morning session on LME. On the economic data front, PMI data from Euro-zone is largely expected to come in lower while the GDP data from Germany might remain unchanged. Third quarter GDP growth of US is expected to be revised upwards. Existing home sales in US are also expected to decline. Housing sector is the major user industry of base metals and declining home sales might have negative impact on base metals. Overall base metal prices are expected to remain on the lower side but the losses in the Indian markets might be limited to owing to weaker rupee. ALUMINIUM Aluminium stocks on LME witnessed draw-downs of 4,100 tonnes. The cancelled warrant ratio has also bounced back strongly indicating that the decline in inventory might continue at least in the near term. On the fundamental front, reports indicated that premiums on primary shipments to Japan in Q1 2011 might drop to as low at $110/tonne as against $116-118/tonne in Q4 2010. Bleak prospects for investments might have reduced the demand for the metal. COPPER Inventory on LME declined by 825 tonnes thereby marking 12th consecutive decline. On the fundamental front, Imports of copper into China in the month of October came in at 169,897 tonnes, the lowest level in two years, thereby adding to the pressure. The copper market continues to remain in backwardation indicating tight supplies in the near term. LME Spot prices are trading higher by $24/tonne compared to 3 month forwards. LEAD Inventory of Lead witnessed decline of 200 tonnes as against decline of 550 tonnes on the previous day. The Lead-zinc spread currently stands at 4.5 and declined too as low as 3.5 during the day. The spread has become quite volatile in the past few days and largely remains in the broad range of -1 to 6. The open interest fell along with decline in prices indicating squaring of long positions. NICKEL Inventory of nickel on LME witnessed modest draw-down of 90 tonnes. The basis on LME continues to remain at average levels giving no clear indication for future price movement. The open interest rose along with decline in prices indicating fresh build-up of shorts. ZINC Inventory on LME witnessed modest decline of 400 tonnes. The basis on LME fell sharply before moving higher. Yet it continues to remain below average levels thereby indicating downside for prices. Fundamentals of Zinc continues to remain relatively weak compared to other base metals and thereby the fall is also steeper.

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