In June quarter along with precious metals, base metal prices also fell saw a sharp decline. However, Indian consumers have not benefited because of that. Considerable weakness in exchange rate of rupee against dollar has not allowed them to benefit from lower metal prices when internationally several base metals are trading at multi year low levels. Aluminum and nickel is trading at their 4-year low level at the London Metal Exchange, while copper is at its 35-month low. Zinc and lead are also trading around levels seen 2 years ago. In India however, benefit of a decline in the international metal markets is limited as the rupee has been depreciating to its own record low levels. Metals have also lost out to growth concerns in China, resulting in lower demand. China is the largest importer and consumer of copper and most other base metals. Indications of likely tapering off of bond buying program has also resulted in unwinding positions in metals. Nic Brown, Head of Commodities Research, Natixis said that, "Base metal prices are primarily responding to conditions in the Chinese economy, since 40% or more of global demand for these metals now emanates from Chinese end-users. With Chinese growth disappointing, and the PBOC perceived to have implemented a notable tightening of monetary conditions over the past week, base metal prices have retreated to recent lows. " However, this has ramifications on Indian companies also. "All metal companies stand to lose because of low volume, weak realisation and forex losses. User industries like automobile, capital goods etc will also not have much to gain as the weak rupee nullifies the benefit of low prices globally. If rupee stabilises, soft metal prices will be a big positive for auto companies, " said Kamlesh Kotak, Head - Equity Research, Asian Market Securities. Still, companies like Finolex Cables see falling prices helping them, although only to a limited extent, company's executive chairman Deepak Chhabria said, "lower rupee has taken away all the benefits. Our cost, however, in last year's June quarter was slightly higher compared to this quarter." Exide Industries, a major consumer of lead for producing lead batteries, has been facing pressure of weaker rupee. Kim Eng India, an FII said in its research on Exide Industries' said, "the 12% depreciation in the rupee's exchange rate vs. US dollar in the past month and a half would hurt Exide because imported lead comprises significant cost of raw material. Given continued weak demand for automotive and industrial batteries, we believe it will be difficult for Exide to increase selling price of its batteries, leading to pressure on margin." Company official on condition of anonymity said that, "70% cost in batteries is of lead which prices in India have gone up this June quarter. We have not been able to pass it onto the customers as it always works." Average lead prices were higher this June quarter by 14.7% in India compared to last June quarter. LME lead average prices price was 4% higher than last year. How long the trend in falling prices will continue is an issue but if and when metals consolidate alongwith a stable rupee could be able to rescue these companies. Nic Brown of Natixis said, "for us, the outlook for base metal prices is mixed. Some metals, such as copper and lead, are expected to experience deficits over the second half of this year, particularly if Chinese growth surprises on the up-side. Others, such as aluminium and nickel, are likely to remain in significant over-supply even if Chinese growth improves. We therefore see substantially more potential up-side for copper and lead prices than we do for aluminium or nickel."

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