Base metals likely to lose sheen

MARKET OUTLOOK

Base metals, barring zinc, are likely to soften this week by around 5 per cent owing to the settlement between striking workers and the management at the La Oroya smelter in Peru.

Workers at the US-owned smelter complex struck a deal with the company last week that saw prices of almost all base metals decline towards the end of the week. The US company produced 59,000 tonne of refined copper, 41,000 tonne of zinc, 120,000 tonne of lead, 1,100 tonne of silver and 2,300 kg of gold last year.

Traders are also sceptical about pumping in fresh funds, as service industries in the US, the second-biggest copper consumer, grew at their slowest pace in four years in March. Besides, rampant profit-booking is taking its toll on prices, analysts said. The market is, however, betting on China to set the trend in base metals.

According to Chinese customs data, the world's largest metal consumer is relying largely on imports as consumption rose to 40 per cent this year against 10 per cent last year. Thus, long-term Chinese demand will continue to fuel prices, though prices may decline in the near term.

In the case of zinc, demand in China is expected to rise about 10 per cent this year from last year's 3.4 million tonne. Experts believe that zinc would stay firm at 30,000 yuan per tonne from 28,000 yuan per tonne as of now.

Meanwhile, copper prices in New York rose to a five-month high after inventories of the red metal fell for the eighth straight week. Prices headed for their sixth consecutive weekly gain, the longest rally since May.

Copper futures for May delivery rose 1.5 cents, or 0.4 per cent, to $3.4025 a pound in the New York Mercantile Exchange. Futures have surged 40 per cent since early February amid falling global inventories and rising Chinese imports. Traders balanced their portfolio by selling copper towards the end before proceeding on long weekend ahead of Good Friday and Easter Monday.

Copper, used in wires and pipes, dropped $50, or 0.7 per cent, to $7,350 a tonne after trading at $7,510 a tonne, the highest intra-day price since October 30. The price of the red metal has increased 16 per cent this year.

Inventories monitored by the LME, the world's largest metals market, fell 0.7 per cent to 178,975 tonne on Thursday. During the week, nickel prices reached $50,000 a tonne for the first time on Thursday, having risen by 50 per cent in three months on supply fears amid rising demand from China and India. The price fell back to $49,700 by the close of trade this week.

Lead was unchanged after rising as much as $20, or 1 per cent, to a record $2,030 a tonne. The metal, used in car batteries, has risen 4.6 per cent this week after the Magellan mine in Australia was suspended for as long as four months after an investigation into lead poisoning. Aluminium dropped $26 to $2,845 and tin lost $275 to $14,000. Zinc, too, lost $95 to $3,405 a tonne.

In the domestic market, copper wire bar closed the week at Rs 387 per kg, a gain of Rs 23, while copper sheet cutting gained Rs 21 to close the week at Rs 345 per kg. Aluminium ingot, zinc slab and nickel cathode in the Mumbai non-ferrous metals market closed with a gain of Rs 3, Rs 7.5 and Rs 130 to Rs 143 per kg, 188.5 per kg and Rs 2350 per kg respectively.