Metals to shine on low stocks

After excellent gains last week, base metals prices are heading for another sparkling week, owing to shrinking stockpiles and a rising supply-demand gap across the board. Last week, copper prices advanced by 7.9 per cent, nickel by 12.5 per cent and zinc rose 5 per cent.

Although, base metals remained slightly bearish on Monday due to profit booking, traders believe the prices would regain soon.

Copper jumped to a three-month high last Thursday on rising demand and supply shortages, with nickel setting record highs and zinc up nearly 5 per cent.

Copper is likely to go up again on speculations of a pick-up in demand from the expanding industrial production in China. According to a report by the National Bureau of Statistics, China, the world's biggest copper user, produced less of the metal used in pipes and wires in the first two months of the current year, as smelters faced shortages of raw materials, even as imports surged.

China's copper output fell 1.8 per cent from a year earlier in January and February, while its industrial output soared 19 per cent. Imports of copper and copper products in February surged 70 per cent.

In addition, the world's biggest miner, BHP Billiton, estimated that copper concentrate would remain in deficit in 2007 and 2008, as smelting capacity exceeds mine supply growth.

The prices of copper witnessed a weekly gain of 8 per cent to $6,620 a tonne last Friday, which was mainly attributed to a sharp decline in inventories and the return of demand from the Chinese. Copper inventories declined to 194,400 tonne from 201,025 tonne during the previous week.

Prices of copper wire bar in the Mumbai non-ferrous metals market jumped to Rs 362 a kg from Rs 348 a kg last week. Under the scrap category, copper utensil scrap surged from Rs 295 a kg to Rs 305 a kg, while copper heavy scrap perked up to Rs 332 a kg from Rs 315 a kg.

Nickel remained in the limelight in the previous week, with rising demand and falling inventories helping prices to rise 12.5 per cent over the week to $51,075 a tonne towards the end of the previous week.

This was the biggest weekly gain in the two-and-a-half years, a trader said. The current price rise was the consequence of falling inventories amid spiraling demand from the stainless steel industry, he added.

The availability of the silvery white metal is in question, with the inventories dropping by 0.8 per cent to 3,564 tonne. Stockpiles have declined 89 per cent in the past 12 months and are equal to less than a day of global consumption.

A 43 per cent gain in prices this year may encourage some steelmakers to use their existing stocks of the metal rather than buy more supplies as the second option may result into multiplying prices in the long run. Nickel demand is estimated to outpace supply by 13,000 tonne this year.

On the domestic front, nickel cathode ended the week at Rs 2,330 a kg from Rs 2,080 a kg in the beginning.

Most base metals were higher last week, except for zinc, which ended the week just about where it began, trading at $3,260 a tonne, as inventories rose and as China increased exports. Zinc inventories rose 7 per cent to 103,525 tonne, the largest one-day gain since June 14, 2005.

Despite a weak trend prevailing last Friday morning, aluminium prices witnessed a handsome gain towards the end of the day, with the white metal closing at $2,837, a gain of $93 from the beginning of the previous week. In the domestic market, aluminium ingot closed at Rs 124 a kg last Friday from Rs 122.5 last Monday.

Meanwhile, aluminium added 3.5 per cent last week on the shutdown of a smelter in Ghana that produces 400,000 tonne a year.

Tin prices were 1.5 per cent higher last week at $13,850 a tonne, as stockpiles in the LME warehouses dropped to their lowest since late 2005 and there were questions over when, or if, Bangka Island smelters will return to production. Tin stockpiles also slumped 2.1 per cent to 9,250 tonne, the lowest since November 11, 2005.