Base metals face price decline

MARKET OUTLOOK

Speculators are not sure if the current bullish sentiment in base metals will continue next week as fabricators in China have already started switching over to copper substitutes including aluminium and plastics.

Aluminium is available at a rate three-and-a-half times lower than copper, and can replace the red metal for application in electrical and electronic sectors. While plastic "" available at dirt cheap prices "" can easily replace copper for non-electricity uses.

"Replacement cannot be denied at higher prices but copper's microbial properties and high energy efficiency can bring the metal back as a preferred choice for consumers," said Peter Charlton, chairman, International Copper Promotion Council (India) and director, International Copper Association (Asia).

Although a majority of traders anticipate a price decline, a section of the traders still feels that base metal prices, save aluminium, can continue their momentum as demand is growing faster than supply.

Meanwhile, fabricators have cut their purchases in spot Chinese market despite the fact that the market will remain closed next week for National Day holidays.

High prices of base metals forced them to exit the market and look for alternate avenues. A shipment of about 20,000 tonnes from Chile is expected to arrive in Shanghai which, traders expect, is the main reason for fabricators' staying away from the market.

On the LME, aluminium rose 2.52 per cent or $60 to $2440 a tonne last week while copper supported the move to close with a gain of 2.32 per cent, or $185, at $8165 on growing supply concerns. Tin and zinc settled with a gain of 0.33 per cent, or $50, and 5.26 per, or $153, at $15255 and $3059 respectively.

The week also saw some action in inventories. In LME-registered warehouses, base metals recorded a fresh additions of copper to the quantity of 1,800 tonnes, aluminium 15,225 tonnes, lead 950 tonnes, nickel 2,550 tonnes and tin 725 tonnes. However, the supply remained scarce for zinc with a way-out of 4,825 tonnes.

On Friday, copper rose to a fresh two-month high on tight supply conditions, and as the dollar languished near a record low against major currencies, making the metal cheaper for holders of foreign currencies.

Following suit, base metals on the Multi Commodity Exchange (MCX) rallied about a per cent with copper for November settlement rising 0.91 per cent to Rs 320.30 a kg. Zinc futures rose as traders covered their short positions ahead of expiry of the September contract on Saturday. The September contract was up 0.89 per cent at Rs 124.30 a kg.

Lead contract for September was up 0.87 per cent at Rs 139.30 a kg while nickel September futures was quoted at Rs 1,274 a kg, up 0.82 per cent from the previous close.