Copper might fall this week on speculation that the worsening sentiment in the global economies could reduce demand for industrial metals.
Despite the huge bailout packages announced by various governments, there were no signs of revival as indicated by the dramatic fall in equity indices last week wherein Sensex fell by 8.22 per cent, Nifty 7.19 per cent, Dow Jones 6.17 per cent, Nasdaq 6.07 per cent, Shanghai 2.56 per cent and Nikkei 4.67 per cent.
There is no demand for industrial commodities, which are closely linked with global financial markets, as major consumer industries, including auto and housing, have been impacted by the slowdown. Due to low demand, metal inventories at the registered warehouses of the London Metal Exchange (LME) and Shanghai Futures Exchange (SHFE) have hit multi-year highs so much so that they can meet global demand for more than five days.
| UNFAVOURABLE CLIMATE Prices of various metals on LME in $/tonne | ||||||
| Date | Aluminium | Copper -wire-bar | Tin | Zinc | Lead | Nickel |
| Feb 13 | 1,347 | 3,407 | 11,400 | 1,140 | 1,145 | 10,400 |
| Feb 16 | 1,316 | 3,272 | 11,110 | 1,091 | 1,136 | 9,920 |
| Feb 17 | 1,311 | 3,271 | 11,010 | 1,090 | 1,103 | 9,980 |
| Feb 18 | 1,281 | 3,152 | 10,900 | 1,071 | 1,060 | 9,725 |
| Feb 19 | 1,296 | 3,291 | 11,150 | 1,113 | 1,085 | 9,860 |
| Feb 20 | 1,265 | 3,150 | 10,800 | 1,060 | 1,016 | 9,575 |
Inventories of copper, aluminium and zinc in LME were recorded at 545,600 tonnes, 31,47,300 tonnes and 354,925 tonnes, respectively. In SHFE, a total of 30,105 tonnes of copper, 201,758 tonnes of aluminium and 62,988 tonnes of zinc have been piling up.
Normally, over one day’s demand was considered as an indication of declining activities in major consuming sectors, including engineering, housing and auto.
But, much would depend on the US Commerce Department’s report, which is due on February 27.
Any positive indication towards recovery in the US economy may create short-term blip in base metals. The US was the largest buyer of copper after China.
Overall, indications are unfavourable for base metals, said Navneet Damani, a base metals analyst with AnandRathi, as speculations were rife for industrial commodities to breach the crucial support levels this week.
On the Multi-Commodity Exchange, most of commodities were currently trading close to the support levels — Rs 152-53 per kg (copper), Rs 480 per kg (nickel), Rs 52 per kg (lead) and Rs 54 per kg (zinc). Breaching this level will create an opportunity for traders to book fresh, Damani said.
All metal contracts lost last week. Aluminium April ’09 contract shrank by 1.82 per cent to Rs 67.25 per kg, copper February ’09 contract by 2.56 per cent to Rs 161.75 per kg, nickel February ’09 contract declined by 2.22 per cent to Rs 493.50 per kg, lead April ’09 contract went down by 4.56 per cent to Rs 54.45 per kg and zinc February ’09 contract by 1.08 per cent to Rs 55.15 per kg.
Naveen Mathur, head-commodities of Angel Broking, said the red metal will remain rangebound in the near term on the lack of demand.
Last week, aluminium fell 6.12 per cent to $1,264.5 on LME, while copper, tin, zinc, lead and nickel slumped by 7.54 per cent, 5.26 per cent, 7.02 per cent, 11.31 per cent and 7.93 per cent to close at $3,150, $10,800, $1,059.5, $1,015 and $9,575 a tonne respectively.
World refined copper production outpaced demand by 47,000 tonnes in November, up from 38,000 tonnes in October, while the surplus in the first 11 months was noticed at 147,000 tonnes versus 143,000 tonnes.
