Prices lose lustre as stocks pile up

DOMESTIC REVIEW BASE METALS

Base metals prices lost their momentum towards the end of the week as stock piling in copper and aluminium restrained bulls to create even a temporary upward move.

Copper stocks during last week advanced by 10,475 tonne to 81,325 tonne while aluminium inventory shot up by 9,150 tonne to 518,875 tonne. Nickel and tin stocks went ahead, however, marginally by 702 tonne and 30 tonne to 10,776 tonne and 7,380 tonne respectively.

In contrast, zinc and lead inventories declined by 6,050 tonne and 3,925 tonne to 550,850 tonne and 46,700 tonne respectively. The decline in lead and zinc inventory is mainly attributed to supply disruptions from New Orleans warehouses.

Despite rising sentiment in the beginning, spot metal prices across the board lost towards the week end on the London Metal Exchange (LME).

Copper - the major driver - was sold on light volumes throughout the week as sentiment about the metal's fundamentals took on a slightly more bearish tone. Metal movement is less today because the situation in the countries like China and India is looking less and less attractive.

Stocks are rising gradually as demand from consumer industries are slowing down. After an initial gain of $15.5 on Tuesday from $1821 on Monday, spot aluminium prices declined on Wednesday owing to profit booking.

The white metal closed at $1810.5, a week loss of $10.5. Barclays Capital reckons the risk of downside below $1,800 per tonne is limited because of numerous supply-side risks including the prospect of dwindling smelter capacity in Europe and improving orders on the demand-side, particularly in the US. Moving in tandem, copper lost $50 at $3725 throughout the week after initial recovery of $7 on Tuesday.

Despite decline in stocks and strong fundamentals, the prices of tin and nickel slid marginally to close the week at $6,475 and $13,620 in comparison with $14,690 in the beginning of the week.

"Higher prices mean less margins and thereby less interest in the business", an Indian trader said. "We are facing paucity of orders as traders have opted for wait and watch" he added.

Base metals in the domestic markets, however, moved upwards as demand for copper and aluminium led the entire metal complex throughout. Copper wire bar gained Rs 3 to Rs 225 while copper heavy scrap also surged Rs 3 per kg to Rs 204 per kg.

Copper light scrap and utensil scrap perked up during the beginning of the week but lost minutely towards the end, with a total gain of Re 1 at Rs 195 and Rs 179 per kg, respectively.

Aluminium utensil scrap and ingots, too, gained Re 0.50 per kg throughout and closed at Rs 84.5 per kg and Rs 102.5 per kg, respectively. Zinc slabs recovered Rs 4 per kg and closed at Rs 90 per kg in Mumbai while lead ingot travelled through bullish trend and ended the week session at Rs 54.25 per kg, a gain of Rs 1.75 per kg.

Tin and nickel had to share downward trend because of less demand from consumer industries in India.

Tin lost Rs 9 per kg to closKe the week at Rs 411 per kg while nickel dwindled Rs 40 per kg and to close the week at Rs 725 per kg.

Copper prices may decline further this week as increases in stockpiles of the metal indicate growing production of the metal used in wiring and plumbing. Inventories continue to move up, therefore, prices will move down.

Copper production has been rising as companies like Switzerland-based Xstrata Plc and London-based Vedanta Resources Plc.

These companies have already expanded their respective capacities at its Alumbrera copper mine in Argentina by 8 per cent and Tuticorin smelter in India. Vedanta is raising the company's annual copper production capacity to 300,000 tonne from 180,000 tonne.