Choppy trade to destabilise the base metals market

MARKET OUTLOOK

Base metals market is likely to remain destabilised this week with choppy trade expected from the organised sector players and need-based stocking by small time operators.

"Despite a strike-threat at Chambishi copper smelter plant in Zambia, fundamentals have not changed much as China has intended to import less metals this year and the US non-farm payroll reported weaker than expected. Therefore, taking a directional view at this stage would be biased," said Jayant Manglik, head-commodities of Religare Enterprises.

Fundamentals remained weak for base metals even as gold and energy were investors' safe havens in the wake of the economic turmoil in the US. Still, investors' keenness to discover base metals as a suitable investment alternative has no takers as traders are no longer interested in investing in such a turbulent market.

Amid uncertainties, base metals bounced back from the December lean period last week as aluminium closed with a weekly gain of 3.68 per cent at $2447 and copper ended the week at $6990.5, a gain of 4.10 per cent last week.

Nickel gained the most (11.80 per cent) during last week to close at $29,515 per tonne, the biggest weekly gain in three years on speculation that demand for the metal would increase from the largest consumer, the stainless steel industry.

Zinc also performed better last week in anticipation that the bull ride would come back in this metal, used mainly for steel galvanizing. One of the most volatile metal in the non-ferrous class, zinc gained 7.44 per cent to settle the week at $2,563 per tonne. Lead gained 4.06 per cent to close at $2,665, while tin ended with a minute gain of 0.60 per cent at $16,550 per tonne.

With crude oil and gold hitting their respective all time highs and dollar continuing to weaken as a result, inflation remained a major worry for economists. Certainly, investors would look for avenues that were giving better returns, and crude oil and gold fit the bill. Therefore, investment in base metals especially with the aim of a preferred investment destination remained lacklustre.

Last week, the dollar traded near the lowest in a month against the euro and yen on speculation that the US borrowing costs will drop.This week, fears of a slowdown in the US economy could crimp demand for metals resulting into a weakness in prices, an analyst said.

Meanwhile, London Metal Exchange, the world's largest trading platform for copper and aluminium, hit another milestone in 2007 when the value of trading rose 17 per cent to a record $9.5 trillion. According to LME sources, almost 93 million metals and plastics changed hands, 7 per cent more than in 2006 and also a third straight record.