Base metals ends higher on firm US dollar

Despite strength in the US dollar and choppy sentiments in the global financial markets, base metals pack ended in green with aluminum being the exception.

Sharp rise in the US bond yields on proposed extension of Bush-era tax cuts led the US Dollar Index （DX） to appreciate almost 0.5% on Tuesday.

On the MCX, gains in the metal prices were capped on account of appreciation of the Indian Rupee.

Zinc delivered the best performance on both the LME as well as on MCX on Tuesday. The metal prices gained almost 3 percent on the LME, touching an intra-day high of $2347.75/tonne yesterday.

Falling inventory levels of the metal acted as a supportive factor for the zinc prices on Tuesday. LME zinc inventories declined by 625 tonnes to reach 632,825 tonnes yesterday. On the MCX, prices gained by 2.5 percent, to close at Rs 102.50/kg on the same day.

Aluminium continued to decline for the second consecutive day on the LME as well as on the MCX on Tuesday. Stronger US dollar and choppy sentiments in the global equity markets exerted pressure on the metal prices yesterday.

Decreasing levels of the LME inventory did not provide any respite to metal prices yesterday. Aluminium inventories fell by 4,500 tonnes to reach 4,287,225 tonnes on Tuesday.

Chinese nonferrous metal output up 24pct in 10 months According to the report from Ministry of Industry and Information Technology released yesterday, China’s output of ten nonferrous metals, including aluminum and copper rose 23.9 percent y-o-y to 26.14 million tonnes in the first 10 months of 2010.

Refined copper output increased by 11.8 percent to 1.78 million tonnes as compared to the same period a year ago and that of aluminum was up 32.5 percent to 13.74 million tonnes. Refined lead production rose 8.8 percent from a year ago to nearly 3.35 million tonnes in the first 10 months of the year and zinc rose 21percent to 4.26 million tonnes.

Outlook

Base metal prices are expected to trade on a weaker note today taking cues from the strength in the US dollar. Stronger dollar will push the metal prices in the downward direction today. Moreover, mixed sentiments in the global financial markets will also act as a negative factor for metal prices today.