Base Metals Settle Lower On US Job Data: March 30, 2012

Base metals prices continued the declining spree and Aluminium and Nickel retreated while other base metals gained slightly after weak euro-zone confidence coupled with increased jobless claims from US. The Chinese leading index gained slightly providing respite to copper and znc prices.

Today morning base metals are trading positive at LME electronic platform apart from zinc. The Asian equities are mostly trading down after weak US economic releases. The industrial production of Japan has declined indicating weak global manufacturing activity lowering apparent demand for base metals resulting in price fall.

China may lower its interest rate after increasing long term quota for debt and this may provide slight respite to the dwindling metals pack in the medium term, however presently metal demand has remained diminished and prices declined by 0.1 to 1.5 percent at Shanghai metals exchange.

From the euro-zone the finance chiefs are going to meet in Copenhagen to merge the permanent and temporary rescue fund to 940 billion euros for an additional year to provide bailout to the debt-ridden member countries.

The euro is also trading positive by 0.38 percent due to anticipation over the same after yesterday’s fall as confidence continued to deteriorate, while the German retail numbers are expected to increase and hence euro may continue to strengthen in today’s session.

From the US, conflicting views from the Fed have resulted in confused price performance in the past and even higher jobless claims and similar rate of consumption may continue to weaken personal spending. Even the Chicago purchasing managers index is expected to decline indicating that corporate procurement might get delayed due to uncertain economic outlook.

However, personal income and Michigan confidence is expected to improve and may recover losses in metals.

Overall, due to weak equities coupled with mixed economic expectation we recommend holding short positions for today’s session while volatility might be witnessed during evening hours.

Aluminium

Aluminium prices came down by 1.61 percent at LME while at MCX prices came down by 0.73 percent after weak euro-zone confidence and US releases.

Aluminium market is expected to remain in surplus consecutively for the sixth year and presently even with higher cancelled warrants metal prices have failed to gain.

We expect metal prices to continue the downtrend in morning while slight recovery might be witnessed in the evening due to slight better economic expectations from US, overall prices may continue to remain weak.

Copper

Copper prices gained slightly by 0.01 percent at LME, while at MCX prices gained 0.24 percent as US Dow gained 0.15 percent.

Fundamentally, prices may remain weak in today’s session as the red-metal market is presently under backwardation however due to optimism over euro-zone prices are expected to be volatile in today’s session.

Red-metal prices may closely follow the economic developments and with weak equities coupled with mixed economic data from US slight recovery might continue in evening.

Lead

Lead prices gained 0.30 percent at LME while at MCX prices gained by 1.34 percent due to Indian rupee depreciation of 1.2 percent.

The dull metal market has also headed towards backwardation indicating weak future demand, however prices may trade firm due to optimism over increased euro-zone crisis fund.

Volumes have been shifting due to contract expiry and may restrict gains in present contract, however open interest is declining indicating the dicey trend in near future.

Nickel

Nickel was the top loser and prices were on a losing spree consecutively for the fourth day and declined by 2.42 percent at LME while at MCX prices retreated by 1.88 percent.

Activities in the spot market have been weak in US and China and manufacturers are presently procuring metal directly from the producers (Vale & Norilsk) due to better credibility and increased production, prices may further decline.

Weak equities coupled with slowing industrial activity globally may restrict any upside in today’s session, however short covering may provide slight recovery.

Zinc

Zinc prices gained 0.25 percent at LME and at MCX prices gained by 0.49 percent after Chinese leading index gained slightly.

Zinc prices are trading at premium compared to lead but the cancelled warrants have continued to decline indicating weak spot market activity, even the contango is presently weak and may decline further in today’s session.

Weak global equities coupled with mixed economic expectation and weak Chinese demand may continue to weigh on zinc prices narrowing the spread with lead.