Base metal prices ended higher with gains of anywhere between half to one percent, with the exception of Nickel which ended lower by one percent. Supportive data from China along reports of higher demand sent prices higher.
Copper prices made a new life-time on both LME and MCX. Stronger dollar index however capped the gains.
US equity markets ended lower by 0.7 percent as disappointing results from some of the IT companies fuelled profit booking. Most of the Asian equity markets are trading lower lead by Shanghai which is trading with losses of more than three percent.
Dollar index continues to move higher and is trading up by 0.2 percent. Reports indicated that China, World’s largest consumer of base metals, sold nearly 50,000 tonnes of zinc from state reserves at below market prices to curb the price gains. This has sent zinc prices lower by 5 percent in the Chinese market.
The same is spilling over to London Metal Exchange as well. Currently all base metal prices are trading lower with losses of anywhere between 2 to 4 percent on LME. On the economic data front, industrial production data from India is expected to come in modestly higher while both GDP growth and industrial production in Euro-zone is expected to slowdown.
The only silver lining being the consumer confidence from US might come in higher. Overall, we expect base metal prices to open on the lower side and given the expectation of weak economic data, prices might continue to remain on the lower side.
ALUMINIUM
Inventory of Aluminium on LME witnessed draw-downs of 7,225 tonnes as against decline of 8,575 tonnes witnessed on the previous day. This marks sixth consecutive decline.
Aluminium stocks are headed for a third weekly consecutive decline.
On the fundamental report, Japan’s second largest producer, Sumitomo Light Metal Industries Ltd, expects the sales this fiscal year to a record high. The increased demand is expected to be from automobile makers.
COPPER
Copper prices made a new life time high on both LME and MCX. Inventory on LME declined by 1000 tonnes.
On the fundamental front, strike by workers at Collahuasi copper mine moved into seventh day as negotiations over a new wage contract remain stalled. The company continues has reiterated that it is operating at normal levels.
The copper market has moved into backwardation indicating tight supplies in the near term.
LEAD
Inventory of Lead on LME witnessed draw-down of 400 tonnes as against build-up of 275 tonnes on the previous day.
Stock movement on LME continues to remain uneven and the cancelled warrant is also now giving no clear direction.
On the fundamental front, October automobile sales in India came in at 182,992 as against 169,082 in the prior month. Auto sales continue to remain robust in India.
NICKEL
Nickel was the only base metal to end lower as increasing inventories on LME continue to remain an area of concern.
Inventory of nickel on LME witnessed build-up 282 tonnes as against increase of 156 tonnes witnessed on the previous day.
Stocks are increasing for four consecutive days and are headed for a fifth weekly increase. Continued build-up in inventory is one of the reason why nickel has underperformed the entire base metal pack.
ZINC
Inventory on LME witnessed decline of 500 tonnes as against draw-downs of 550 tonnes witnessed on the previous day.
The Lead-Zinc spread (Buy Lead and sell Zinc) has become very volatile, the average intraday movement has more or less been 0-0.5, but has increased in the past few days. It closed at 2.45 levels, above the range of 0-2 we expected. So in the near term this spread might widen further to levels of 4 before moving lower.
