Base metals to remain bearish

Copper and zinc futures are likely to trade lower this week, at least till Wednesday, on the London Metal Exchange and MCX in absence of any fundamental triggers, analysts said today.

The metal market will be eyeing the accompanying statement of the US Federal Open Market Committee that will be issued Wednesday following a two-day meeting, for near-term direction, they said.

"We expect copper and zinc prices to trade lower at least till Wednesday on the LME. The metals will look for direction from FOMC's outlook on the US economy," said Ashish Karel, research analyst, Man Financial.

"Overall, the outlook remains bearish. Copper, aluminium and zinc may witness some downward correction for 2-3 days. However, prices may see some upward move later this week," said Harish Galipelli, head of research, Karvy Comtrade.

With the US Federal Open Market Committee widely expected to keep benchmark interest rates unchanged at 5.25 per cent, there isn't much upside support for copper, Galipelli said. MCX February copper contract is likely to face initial resistance at Rs 270 a kg, and upon breaching that, prices may test 278 rupees with the next strong resistance seen at 285 rupees, Galipelli said.

"On the downside, a strong support is seen at 246 rupees, and breach of that level will confirm downward trend," Galipelli said. On the LME, three-month copper contract is likely to find support at $5,700 (Rs 252,168 ) a tonne, while strong resistance is seen at $5,850, Karel of Man Financial said.

MCX February contract is likely to find support at Rs 165.50 a kg, and upon breaching that, the next support is seen at Rs 159. On the LME, three-month zinc contract is likely to find support at $3,575 a tonne, while resistance is seen at $3,725, Man Financial said.

MCX aluminium February contract is likely to trade in the Rs 124-131 a kg range with strong support seen at Rs 120, Karvy Comtrade said.

On the LME, the three-month aluminium contract is likely to find support at $2,650 a tonne, while it may face resistance at $2,850, Man Financial said.

At 3:15 pm, MCX copper February contract was trading at Rs 256.10 a kg, down 2 per cent from the previous close. Zinc for delivery in February on the MCX was at Rs 165.30 a kg, down over 1 per cent.

MCX aluminium February contract was at Rs 126.50 a kg, marginally down from the previous close.

Base metal prices closed lower Friday on the London Metal Exchange on profit booking although outlook for nickel and tin continues to remain strong on the back of near-term supply concerns amid falling inventory, analysts said. LME nickel prices rose to record high for the ninth straight day on an imminent strike at Xstrata-owned Sadbury mine in Canada over the new labour contract that will come into effect from this month end.

The three-month LME nickel contract closed at $38,100 a tonne, down $50 from a day earlier, after touching an all-time high of $38,950, aided by critically lower inventory levels at the exchange monitored warehouses.

Today, nickel stocks at LME monitored warehouses fell 600 tonne to 4,278 tonne.

Taking cancelled warrants into account, just 2,658 tonne is available for the market which is insufficient to meet even a day's of global demand.

Global nickel demand is estimated at 3,500 tonne a day.

The bellwether three-month LME copper contract had Friday closed at $5,810 a tonne, down $50 from the previous close, while the three-month zinc contract closed at $3,640 a tonne, down $70.

The three-month LME aluminium contract, however, closed marginally higher at $2,795 a tonne, up $3.

LME copper inventories rose 5,975 tn to 213,675 tn today, while aluminium stocks were up 1,400 tonne to 729,450 tonne.

On the other hand, zinc stocks were down 825 tn to 98,575 tn, tin stocks fell 375 tonne to 11,555 tonne, and lead stocks dropped 625 tonne to 39,100 tonne.