China to push global base metal prices

MARKET OUTLOOK

Copper is likely to drive base metals prices this week as the red metal may hit the psychological barrier of $8,000 a tonne on a huge spurt in Chinese demand.

Chinese demand alone will push prices globally by 19 per cent next year, as the country has been spending huge amounts on infrastructure for the Olympic Games in 2008 and Asian Games in 2010. The country will spend massive amounts on the upgradation of stadia, roads, railways and hospitality forums where metals are abundantly used.

Base metal exports to China have increased dramatically. According to the country's import data released by a government department, China's imports of copper (and alloys) rose 50 per cent in September and have nearly doubled in the first nine months this year to 1.2 million tonne. Experts believe China's copper demand will grow at 13 per cent per annum.

Increase in Chinese consumption of the metal has is having a huge effect on prices with demand tapering in the US, the world's second- biggest metals consumer, due to the sub-prime crisis.

Meanwhile, almost all base metals lost up to 2-3 per cent last week on profit booking by a section of traders. "Fundamentals still remain strong. Therefore, the current decline may be for a short term with a probable recovery very soon," a local trader said.

On the London Metal Exchange, copper ended the week with a decline of one per cent at $7,860.5 a tonne on fresh stock arrivals in LME-registered warehouses. Copper inventories swelled to 1,54,175 tonne, an addition of 4,225 tonne. Aluminium fell $30 to close at $2,479 a tonne, despite a decline in stocks to 9,21,700 tonne. Zinc rose to $3,704.5 a tonne on arrivals of 1,050 tonne.

Following the suit of other metals, nickel and lead slumped slightly during the week to close at $31,550 and $3,704.5.

Inventories for both metals, for the period under consideration, perked up to 37,332 tonne from 36,534 tonne and 38,800 tonne from 33,450 tonne, respectively.

Esperance Port, Australia's largest exporter of nickel concentrate, got a second environment protection notice requiring it to improve monitoring of nickel dust during ship loadings. Shipments could continue once the notice is complied with, sources said.

In contrast, base and scrap metals surged marginally in the domestic metal market following tight supply of raw materials and huge demand for virgin metals from the infrastructure sector.