Metal scrips dip on fears of meltdown

After initial gains in the morning, the shares of metal companies declined by Monday afternoon, following the fall in prices of metals in the international markets last week.

Prices of base metals slumped between 6 and 9 per cent in London last Friday on the news that one of the leading hedge funds, Red Kite Management, lost about $1 billion last year due to an all-round 50 per cent slump in metals prices. The metal prices remained rangebound on Monday on the London Metal Exchange (LME).

The Hindalco Industries stock slumped 2.73 per cent to close at Rs 178 after opening at Rs 181.5. Similarly, the stock price of diversified base metals producer, Sterlite Industries, opened the day at Rs 514.85 due to firm FII buying, but closed with a decline of 6.27 per cent at Rs 487.45.

The Hindustan Copper stock, public-sector producer of integrated copper, slumped 3.91 per cent to close the day at Rs 98.35 from the previous day's close at Rs 102.35. The Hindustan Zinc scrip, the largest zinc producer, declined by 5.52 per cent to Rs 655.05 after touching a high of Rs 670 in early trade.

The scrip of another aluminium major, National Aluminium Company (Nalco), lost 0.91 per cent to close the day at Rs 234.80 against the previous day's close of Rs 236.95. The scrip touched the intra-day high of Rs 240 in the first few hours of Monday's trade.

The Sterlite-managed Madras Aluminium Company's (Malco's) share price declined by 3.06 per cent to Rs 423.50 from Rs 436.85 the previous day. The scrip touched as high as Rs 437 in early trade amid growing sentiment towards metals companies in the world.

After hitting record highs in December, copper prices slumped more than 20 per cent in January. On Friday, zinc for delivery in three months fell 9 per cent or $310 to $3,080 a tonne on the LME, the biggest drop since July 1997. Copper for delivery in the three months fell 4.6 per cent or $255 to $5,345 a tonne, after hitting $5,250, the lowest since March 27. Aluminium, lead and tin also fell substantially on the LME.

The loss incurred by Red Kite Management was as high as 15 per cent in January alone, a company source said. In order to recover the loss, Red Kite, run by Michael Farmer, Oskar Lewnowski and David Lilley, asked investors in its metals fund to approve an amendment that would require a 45 days' notice before money could be withdrawn, said a company letter issued to investors on January 31. Earlier, investors could redeem at the end of each quarter with a 15 days' notice.

Founded in January 2005, Red Kite Management had made millions of dollars betting on the prices of metals such as copper.