Base metal prices ended mixed; nickel and zinc gained whereas all the other base metals have ended lower. Stronger dollar index along with weak European equities sent base metal prices lower. .Base metal prices ended mixed; nickel and zinc gained whereas all the other base metals have ended lower. Stronger dollar index along with weak European equities sent base metal prices lower. Economic data from US came in mixed with factory orders declining whereas pending home sales improving.
US equity markets ended lower by 0.7 percent as investors booked profits, given the gains that they are sitting on. Fed Chairman Ben Bernanke said that first round of asset purchases improved the economy and that further buying is likely to help, indicating preference of Fed towards more quantitative easing. Since this was largely anticipated the Dollar index did not fall and on the contrary rose by 0.46 percent as traders’ book profit on the dollar shorts.
Most of the Asian equity markets are trading lower and in the morning session on LME, base metal prices are also trading modestly lower. On the economic data front, most of the PMI data from euro-zone are expected to remain largely unchanged but the retail sales are expected to come in modestly higher.
From US, ISM non-manufacturing composite is expected to come in higher and thereby might support prices. Overall, base metal prices are expected to trade lower on the back of stronger dollar index and weak equity markets.
ALUMINIUM
LME inventory witnessed draw-downs of 3,150 tonnes, marking thirteenth consecutive decline
On the fundamental front, In India, Nalco issued a tender to export 7,500 tonnes of aluminium ingots. Nalco’s tenders serve as an international benchmark and last month it sold at a premium of $97/tonne over the LME cash price
The price fell along with a decline in open interest indicating profit booking at higher levels
COPPER
After witnessing decline in the past five day, inventory of copper increased by 650 tonnes
The cancelled warrant ratio continues to decline and thereby the inventory might continue to rise in the near term
The basis on LME has moved up strongly from -$1/tonne to $15/tonne indicating upward bias for prices
LEAD
LME inventory for Lead witnessed a huge build-up 3,475 tonnes. This was largely expected as the decline in the cancelled warrant ratio was pointing towards the same
The decline in inventory of zinc along with a significant increase in inventory of lead has reduced the spread between the lead and zinc to 2 from 3 on the previous day. In the very short term, this may decline further, but that will give buying opportunity （Buy lead and sell zinc） as historical data continues to support for the spread to increase to levels of even 5 and 6
NICKEL
Nickel inventory on LME declined by a marginal 54 tonnes
On the fundamental front, report from World Steel Association indicated that in 2011 world steel demand is expected to grow 5.3 percent to a record 1.34 billion tonnes
After being in backwardation for few days, the market has come back into contango with premium now at $22/ tonne. This is indicating upward bias for prices in the near term
ZINC
LME inventory for zinc witnessed decline of 1000 tonnes
The decline in inventory of zinc along with a significant increase in inventory of lead has reduced the spread between the lead and zinc to 2 from 3 on the previous day. In the very short term, this may decline further, but that will give buying opportunity （Buy lead and sell zinc） as historical data continues to support for the spread to increase to levels of even 5 and 6
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