Base metals may go down further in the coming week on the back of declining global demand, further reinforced by little buying support from China.
Navneet Damani, a base metals analyst with Anand Rathi, however, believes that industrial metals may rise marginally in the initial one or two sessions, to be followed by a sharp correction. There are some indications that China might resume infrastructure development which may spur demand. But the sagging growth in the US, Europe and Japan may limit overall gains, an analyst said.
According to reports, the US consumer confidence in March held near a 28-year low, reflecting mounting job losses and a deepening economic crisis. According to an analyst, unless the US economy recovers and industrial activities bounce back, other markets may not get a fair economic support, resulting in further deterioration.
According to an analysis by Angel Broking, huge re-development activities are expected to take place in China. The stimulus package of $586 billion announced by China is spread over two years and aimed at infrastructural development. The report says that the demand for base metals will remain weak in the first half of the current calendar year and recover in the second half.
“There have been major production cutbacks in the base metals sector and the impact of these cuts could be witnessed in the second half when demand picks up slightly. In the short term, we expect base metal prices to remain volatile and we could witness rallies on the back of short covering and technical buying, but these rallies may not be sustainable as the short-term fundamentals look weak.”
Last week, barring lead and aluminium, all base metals trading on the London Metal Exchange (LME) declined on profit booking. Copper and zinc declined one per cent, while nickel and tin slumped 2.6 per cent and 6 per cent, respectively. In contrast, lead and aluminium jumped 3.3 per cent and 3.4 per cent, respectively, on bargain buying by a group of traders.
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| GLOOMY DAYS AHEAD Base metals prices and inventories on the LME | ||||||
| Metal | LME Price ($/tonne) | LME inventories (tonnes) | ||||
| Mar 6 | Mar 13 | Chg (%) | Mar 6 | Mar 13 | Chg (%) | |
| Copper | 3695 | 3660 | -0.9 | 522,025 | 497,625 | -4.7 |
| Zinc | 1225 | 1210 | -1.2 | 349,825 | 342,650 | -2.1 |
| Nickel | 9725 | 9475 | -2.6 | 99,270 | 99,756 | 0.5 |
| Lead | 1205 | 1245 | 3.3 | 60,050 | 58,925 | -1.9 |
| Aluminium | 1305 | 1350 | 3.4 | 32,66,600 | 33,64,025 | 3.0 |
| Tin | 11,100 | 10,425 | -6.1 | 9045 | 9575 | 5.9 |
| Source: LME | ||||||
Copper touched a high of $8,940 in July last year but weak fundamentals and poor global economic situation put pressure on the metal and it touched a low of $2,825 in December 2008. However, the metal has started 2009 on an upbeat note and found good support above $3,000, backed by short-covering rallies and speculation of re-stocking of the metal in China. Chinese domestic copper consumption, particularly for power and infrastructure sector, will be robust.