Base metals hit new highs on low stocks

The year 2006 was a sparkling one for base metals prices, owing to depleting inventories and higher demand from all corners amid numerous infrastructure growth plans.

Zinc and nickel prices showed a jump of over 100 per cent owing to higher demand from industrial sectors.

Consumer awareness over safer metals, such as stainless steel and galvanised steel, which use about 67 per cent of the world's nickel and zinc production, created huge demand for these metals from the industrial sector.

No adequate capacity addition this year resulted in their short supply, leading to the rising prices.

The zinc prices gained 123.85 per cent to close the year at $4,280 after touching the historical height at $4,600 in the fourth quarter of the year. Inventories during the period slumped by 77.55 per cent from 393,550 tonne in the beginning of the year to 88,350 tonne at the year-end.

Nickel too witnessed a booming phase, seeing a surge of 123.85 per cent in prices owing to 80 per cent decline in inventories. Nickel closed the year at $32,700 from $13,505 in the beginning. Moving towards less than a day's consumption of 10,000 tonne, the inventory in the LME-registered warehouses settled at 7,092 tonne from 36,042 tonne in the beginning of the year.

In the wake of high durability, stainless steel producers have increased the use of nickel from as low as 1 per cent to 3 to 4 per cent, which indicates that the nickel demand has jumped four-fold. But, zinc supplies have been hitting new lows in the absence of fresh arrivals from existing producers.

Prices of copper managed to perk up by 41.75 per cent towards the end of the year after touching an all-time high of $7,800 in the third quarter of the current calendar year.

Rising electrical and electronics demand had boosted the prices in the beginning. But, hidden stocks took their toll to control the one-side price movement. Hidden inventories led to the stocks rising to close the year at 178,125 tonne from 92,225 tonne in the beginning of the year.

Tin and lead, the independent movers on the LME, managed to grow, but the quantum was less.

Tin prices grew by 69.83 per cent to close the year at $11,200 ($6,595 in the beginning of the year), while lead prices jumped by 49.77 per cent to end the year at $1,649 ($1,101). Inventories of tin declined during the year by 23 per cent to close at 12,855 tonne from 16,725 tonne in the beginning.

Prices of aluminium witnessed a rise of 22.41 per cent, the least in the base metals family, to settle the year at $2,780 from $2,271 in the beginning. The limited gain in aluminium is largely attributed to a meagre 8 per cent addition in the inventories at 695,550 tonne at the end from 643,700 tonne in the beginning.

The intensity of growth was comparatively less in the domestic aluminium market. Copper wire bar in the Mumbai non-ferrous metals market confined its gain to 39.62 per cent to close the year at 370 a kg from Rs 265 a kg in the beginning.

Aluminium ingot closed at Rs 142 a kg, a gain of 19 per cent from the beginning of the year, while zinc closed with a gain of 89.34 per cent at Rs 231 a kg.

Although a weak sentiment is looming large on the metals, the higher consumption and consumer awareness in better use will drive base metals to a brighter future in 2007 as well.