Fund buying keep metals buoyant

An anticipated Chinese demand propelled base metals globally last week, with copper prices in London witnessing the biggest weekly gain since May on renewed demand by hedge funds for commodities, including industrial metals.

In late Friday evening, copper recorded a weekly gain of 8.66 to settle at $6270. While aluminum, tin, lead, zinc and nickel excelled the week by 3.53 per cent, 1.72 per cent, 5.78 per cent, 7.52 per cent and 7.28 per cent to close the week at $2930, $13580, $1968.5, $3619, $44432 a tonne respectively.

Traders said fund buying has been helping the current metal price boost as traders, who had earlier invested in other commodities, are diverting their investments towards metals. But, they cautioned the price rise would not be sustainable for long as the profit booking would prompt many to exit when prices are ruling at higher ebb. Bankers have estimated 25 per cent rise in commodities investments this year.

Copper prices have risen for three-straight weeks, the longest rally since September, on signs of increasing demands from China, the biggest consumer of the metal. A local trader said if growth continues at the same rate in China, the US and Europe, demand for copper is going to be inevitably strong.

According to custom data, Chinese imports of copper and copper products jumped 44 per cent in January against the corresponding period a year ago.

Surendra Mardia, a noted copper trader in Mumbai, said the real trend would be known in a few days, when Chinese traders begin their trading.

Although China holds about 13 lakh tonne of copper, which is far ahead of the LME stocks, the price would surely go up if they start rebuilding their stocks for future applications, Mardia added.

Tin was supported by Indonesian government's decision to curb illegal mining. But nickel has had a little technical pull back. However, stocks are low, demand is strong and people just don't seem to do without it. A target of $45,000 is easily achievable. Nickel inventory in LME-registered warehouses were down 12 per cent, or 480 tonne, on Thursday last week after falling 9 per cent on Wednesday.

A production problem in Australia resulting in declaration of force majeure at a British refinery resulted in speculative interest in lead. But, the sentiment would collapse if production resumes at the plant.

In the domestic metal markets, copper wire bar jumped by Rs 15 to Rs 345 a kg, while copper cable scrap gained Rs 10 to Rs 315 a kg. Aluminium remained steady at Rs 119 a kg, but growing international sentiment added to local zinc slabs, which rose to Rs 191 a kg from Rs 178 in the beginning of the week. Nickel cathode and tin slabs closed the week with a gain at Rs 2020 a kg (from Rs 1950) and Rs 696 a kg (from Rs 635) respectively.

Trade volume remained very poor in the domestic market due to volatile metal prices globally.