Base metal trades come to a grinding halt

Trade in secondary base metals have come to a near standstill with traders shutting shop for at least 45 days.

The reason - they can not afford transactions below their purchase price. Unorganised domestic metal markets constitute roughly 50 per cent of the total base metal trades in the country.

On the London Metal Exchange (LME), base metals have crashed dramatically so far this month with copper declining 15 per cent, zinc 18 per cent, nickel 6.5 per cent and to a lesser degree aluminium (1.32 per cent). With copper being the market mover, a drastic drop in the metal's prices has frustrated traders.

Importers who booked their position at 20 per cent above the prevailing price are in dire straits. They need to roll over their funds but customers are unwilling to pay higher prices.

Although domestic markets take a stock of the LME developments, traders are not ready to reduce their selling price as notified by the Bombay Metal Exchange (BME).

"The BME-declared price still remains on paper as they are irrelevant for physical trade. They only help understand the market pulse," said Rohit Shah, president, BME.

"The downward sentiment is likely to prevail in December as global investors book profits to show healthy year-end results," said Surendra Mardia, senior vice-president, BME and an active base metal trader.

About 90 per cent of approximately 10,000 active traders across the country do not hedge directly on LME and, therefore, depend upon importers.

According to Shah, their survival has become very difficult due the appreciating dollar and falling LME prices.

METAL SLUMP

Base metal trades are far from buoyant as traders are shutting their businesses

November with copper declining 15% and zinc down 18%

Traditionally, December is a slow month as global investors usually book profits

Only a tenth of the traders in the country hedge directly on LME and a majority are dependent on importers