International and local base metals have been trading flat for the last couple of days, tracking copper, the most-active metal, whose prices have had almost no movement, owing to a slew of negative and positive data in the global markets.
The International Monetary Fund raised its global growth outlook for FY13 from 3.3% to 3.5%, but not without stating its concerns over the downside risks that still prevail; economic data released from the US and Eurozone regions have been better than expected, but concerns over the Eurozone crisis are far from over, say analysts.
This, mixed with demand/supply constraints for copper is capping any significant upside in the metal.
All this is keeping base metal prices, known to move in tandem with the health of the economy, in check.
Oliver Blanchard, chief economist, IMF, in an interview to mark the release of IMF's latest World Ecnonomic Outlook, said, "We are now in a position where there is an uneasy calm, but things can change day by day. Things are relatively quite, but there is enormous risk looking forward of another crisis."
"Our baseline for World Economic Outlook is based on the assumption that there is no new Eurozone crisis, but uncertainty remains very high. What we have is growth but, mediocre growth in advanced countries," he said.
Demand for copper, the most-active base metal, from most base metal-consuming nations still remains low, with a steady supply in the global markets, Priyanka Jhaveri, analyst with Kotak Commodity Services, said. This is weighing heavily on copper prices, while other base metals in the complex follow suit, she said.
"Copper inventories at the Shanghai Futures Exchange are huge, with little or no demand from China," Jhaveri said, which is pressurising copper prices globally. Copper inventories at the SHFE are close to one million tonne.
"Even if demand in the Chinese market picks pace, buyers will first deplete stocks from the exchange-monitored warehouses, which will contribute to little or no offtake from the global markets," she said.
Intraday, base metals have been in and out of the red-range owing to the slew of economic data from the US and Eurozone region.
Copper, the most-active base metal, opened close to Wednesday's settlement in the local and international markets. In the morning session the April copper contract on the MCX was trading at Rs 417.15 per kg, up 0.95 paisa from previous close. The benchmark three-month contract on the LME at the same time was trading at $8,051 per tonne, up only $1 from previous settlement.
Intraday, markets were eyeing Spain's long-term bond auction, which resulted in higher yields although it managed to sell 2.5 billion euros of bonds, it had expected to sell. This strengthened the dollar against the euro, which weighed on base metal prices. LME three-month copper was trading at $8,026.50 per tonne, down $23.50 from previous close, dragged by the greenback's strength.
The rupee, however, has been trading weak against the American currency at the Interbank Foreign Exchange, managed to limit copper's fall on the MCX. Post, Spain's bond auction, MCX April copper traded at Rs 417.10, up 90 paisa from previous close. A weak rupee makes dollar-denominated commodities more expensive to import.
Other base metals in the complex reflected copper's trend, the most-active base metal in the complex, and were trading only slightly higher today. Three-month zinc contract on the LME was trading at $1,993.25 per tonne, up $2 from previous close and the benchmark contract on MCX was in the green zone by gaining merely 50 paisa at Rs 103.65.
"Demand for zinc from China is expected to pick up supported by demand from galvanising industries, which is helping zinc remain close above Rs 100 mark," Jhaveri siad. However, the upside is capped by inventories at the LME-monitored warehouses, which are at a 17-year-high.
Markets will be looking at weekly US jobless claims data, home sales data, Federal manufacturing index and Eurozone's consumer confidence data for further cues on base metals today. "All these data influence the movement in base metals," she said.
