Mixed trend likely in base metals

MARKET OUTLOOK

A mixed trend is likely to prevail in the global base metals market, with copper and lead likely to remain subdued, while nickel and aluminium may rise on Chinese data.

The recently revealed data by the Chinese customs indicated that the world's biggest consumer of copper, aluminium, nickel, zinc and lead may go slow on building copper inventory in the wake of about 61 per cent jump in imports during the first quarter of the current year. The country doubled imports of the metal to 192,069 tonnes in April to meet the growing demand, which normally peaks in spring.

In the first four months of the ongoing year, China imported 689,155 tonnes of refined copper and alloys which, experts believe, is enough to meet the country's requirements. Imports of copper concentrate in April rose 48 per cent to 483,382 tonnes compared with the corresponding period a year ago. Between January and April, the country imported 1.52 million tonnes of copper concentrate, a rise of 25 per cent.

Meanwhile, despite gaining 2.9 per cent or $200 to $7,200, copper recorded 1 per cent decline, a third consecutive fall on the London Metal Exchange (LME). But, according to local traders, the overall trend of rising stocks, coupled with lower demand, may push the red metal further down.

Led by China, lead is also likely to remain depressed as the imports have risen 43 per cent to 5,613 tonnes in April and 40 per cent in the first four months to 19,052 tonnes. An appreciating dollar has increased the chances for the metals market to follow the equity markets. The dollar-denominated metals become more expensive in times of rising economic uncertainty and investors trim their portfolios because of the rising dollar.

According to sources, there are a large number of outstanding call option contracts, reportedly around 50,000, to buy more than 1 million tonnes of aluminium at $2,900-3,400 a tonne. Therefore, the prices of the metal are likely to remain firm this week. The metal was hovering around $2,783 a tonne on Friday, up from $2,755 on Thursday. Nickel on the LME gained 5 per cent to $47,000 a tonne from $45,010 as speculators bought back short positions as a bet on lower prices ahead of the long weekend holidays.

In the Mumbai non-ferrous metals market, copper wire bar declined during the week to Rs 372 a kg from Rs 383, while light scrap, utensil scrap and sheet-cutting slumped to Rs 333, Rs 303 and Rs 329 a kg from their respective levels of Rs 336, Rs 307 and Rs 332 a kg in the beginning of the week. Moving in tandem with the international market, aluminium slabs gained marginally up to Rs 141.5 a kg (Rs 140.5 a kg), while zinc slabs and lead ingots declined to end the week at Rs 192 and Rs 95 a kg from Rs 196 and Rs 98 a kg, respectively.