Base metal rises on weak dollar index

After trading higher for most part of the day, base metal prices ended lower after data indicated less than expected job additions in US and unemployment rose back to 9.8 percent. The losses were however marginal as weak dollar index supported base metal prices.

On Friday, US equity markets ended in green thereby paring most of its intraday losses even after weak payrolls data. High unemployment rate created expectation of further quantitative easing by Fed and thereby dollar index declined by 1.4 percent.

Taking cues most of the Asian equity markets have opened on the higher side. Dollar index is trading modestly higher but might continue to witness pressure. In the morning session on LME base metal prices are trading on the higher side with gains of close to half a percent.

There are no major economic data due to be released today. Over the weekend, Fed Chairman indicated that they may consider more quantitative easing given the weak payrolls data.

This might keep the dollar index lower and support commodity prices. Overall, we expect base metal prices to remain on the higher side.

ALUMINIUM

Aluminium stocks on LME witnessed build-up of 1,200 tonnes as against decline of 4,450 tonnes on the previous day.

On a weekly basis total stocks saw net addition 1,375 tonnes. Shanghai warehouses however witnessed draw-downs of 18,226 tonnes.

The open interest declined along with modest decline in prices indicating profit booking at higher levels.

COPPER

Inventory on London Metal Exchange witnessed build-up of 1,200 tonnes as against decline of 2,425 tonnes on the previous day.

On a weekly basis, stocks decline by 3,375 tonnes. Warehouses in China also witnessed decline of 5,815 tonnes.

The basis indicates that the copper market continues to remain in backwardation however the basis has risen from -$60/tonne to $42/tonne.

LEAD

Inventory of Lead on London Metal Exchange continued to witness draw-down of stocks for fourth consecutive day. Stocks declined by 175 tonnes.

On a weekly basis also, stocks declined by 250 tonnes on LME.

The cancelled warrant ratio has started moving lower again indicating that the pace of inventory draw-downs may slow down.

NICKEL

Nickel Inventory on London Metal Exchange witnessed addition of 120 tonnes as against decline of 1,014 tonnes on the previous day.

On a weekly basis stocks witnessed decline of 564 tonnes.

The inventory movement on London Metal Exchange continues to remain uneven and the cancelled warrant ratio has also been very volatile thereby giving no clear direction as to future inventory movement.

ZINC

Zinc stocks on the London Metal Exchange witnessed draw-downs of 225 tonnes. On a weekly basis also, stocks rose by 1,475 tonnes.

Warehouses in china however witnessed decline of 1,580 tonnes.

The basis has become very volatile in the past few days and currently stands at $12/tonne.