Base Metals Under Pressure on Greece Economic Worries

Amid volatility, base metal prices ended lower with losses of anywhere between three to five percent. Greece’s referendum on Europe’s rescue plan raised concerns that the situation might worsen further. This kept all the risky assets under pressure.

Euro declined by more than a percent for second consecutive thereby weighing on the metal prices. In Indian markets losses were however limited as weaker rupee limited the downside for prices. UK economy grew by half a percent in third quarter, but PMI numbers entered into contraction territory thereby raising concerns. ISM manufacturing and prices paid numbers from US also came in weaker than expected.

US equity markets tumbled for second consecutive day as key indices witnessed cuts of more than two percent. Concerns on the Euro zone front weighed on the markets. Taking cues most of the Asian equity markets are also trading lower with losses of one to two percent.

Euro is witnessing some bounce back and thereby is also providing some respite to base metal prices in the morning session on LME where they are trading higher with gains of half to one percent. Ahead of the G-20 meeting that begins tomorrow, German and French ministers has called for meeting with Greece PM today to discuss the referendum that they have announced.

Also US FOMC is expected to leave interest rates unchanged at 0.25 percent but its assessment of economy along with other measures would be keenly watched. ADP employment report is expected to indicate faster job additions in the month of October.

Overall, given the some of the key events like Euro zone ministers meeting, FOMC rate decision and G-20 meet from tomorrow, base metal prices are expected to remain quite volatile but the bias remains on the lower side.

Aluminium

After witnessing draw-downs for nine consecutive sessions, aluminium stocks on London Metal Exchange remain unchanged.

Cancelled warrant ratio though briefly bounced back, it continues to remain near the 4.5 percent mark of total stocks. On the fundamental front, NALCO has issued export tender for selling 9000 tonnes of aluminium ingots.

Open interest increased by a massive 80 percent indicating huge build-up of short positions.

Copper

Copper stocks on London Metal Exchange witnessed draw-downs of huge 9,625 tonnes as against decline of 3,000 tonnes on the previous day.

On the fundamental front, Indonesia’s Freeport owned Grasberg copper mine indicated that it was operating at reduced rates and has yet to fix its main pipeline used for moving concentrate to the port.

Cancelled warrant ratio has declined by more than a percent indicating that draw-downs might slowdown in the near term.

Lead

Lead prices ended lower with losses of 4.8 percent on LME while in Indian markets losses were limited to 2.5 percent.

Lead stocks from London Metal Exchange warehouses witnessed draw-downs of 375 tonnes as against modest decline of 100 tonnes on the previous day.

Cancelled warrant ratio has however moved further higher and stands at close to six percent of total stocks indicating that in the near term draw-downs might continue.

Nickel

Nickel was the top loser among the base metal pack as it tumbled nearly 5 percent on LME Nickel stocks on London Metal Exchange witnessed build up of 168 tonnes as against drawdowns 534 tonnes on the previous day.

On the fundamental front, Lower nickel prices has prompted nickel miner Kagara Ltd. to look for potential buyers for its nickel mine. The company processes about 50,000 tonnes per year of nickel bearing ore.

Zinc

Zinc stocks from London Metal Exchange witnessed draw-downs of 3,600 tonnes as against decline of 2,475 tonnes on the previous day.

Cancelled warrant ratio continues to remain stable at close to 10 percent of total stocks indicating that draw-downs might continue.

Open interest witnessed a modest change of 3 percent indicating combination of both unwinding along with build-up of short positions.