Maintain Short Positions in Metals

Base metal prices settled mostly down. Amid the pack, copper retreated the most by over a percent at MCX. Going ahead, we expect base metals prices continue to remain weak for the day.

Today morning, the metals pack was seen trading down by 0.2-0.8% at LME. Chinese benchmark rate dropped the most to 20.50% in a month as the reduced CRR took effect from today to help ease cash squeeze, estimated about an addition of 400billion Yuan to the financial system.

This would have supported the Asian equities but the Chinese bourses are still stumbling with mild losses; while the others are heading for weekly advance as the US reports yesterday beat the estimates. This would have eased the hard landing of China as we expect capital inflows in Asia will resume.

The demand for copper is likely to be strengthening from US to China when stockpiles monitored by the world’s biggest metal exchange are at two and half years low. LME inventories of metals are also set for a fifth consecutive monthly drop which might support the prices.

Reports today from Germany may show GDP probably have grown by 1.5% in the Q4 YOY. However, exports would have declined due to the crisis and so capital investment also likely to be reduced. This would have created pressure on the Euro, while dollar could get support from the US home sales and confidence data which are most likely to improve in the evening.

Therefore metals prices could retreat a bit in the European hours owing to the weak data expectation. Hence, we recommend remaining short for the metals at higher prices.

ALUMINIUM

Aluminum prices fell 0.31 percent at LME and 0.36 percent at MCX

Fundamentally the rise in cancelled warrant indicates rise in spot demand and that would support the prices for the day

The contango effect is also slowly marching northwards indicating the future better demand perspective may support price gain in today’s session

COPPER

Copper prices however fell the most among the lot. It lost over a percent at MCX

The demand for copper is likely to be strengthening from US to China when stockpiles monitored by the world’s biggest metal exchange are at two and half years low

However prices may remain bit volatile as skepticism still hovers the market since Greece is not yet expected to tame the entire crisis

LEAD

Lead prices however gained at the both LME and MCX Fundamentally, the price rise may not be supported by the lower open interest. So, it is likely to fall

Contango effect however is marching northwards indicating strong future demand. This would indicate buying could be done at lower prices for the day

NICKEL

Nickel prices also declined at LME and MCX both. Weak global equities might not supported the prices to gain

Nickel cancelled warrant declined indicating weak spot demand which has weighed upon the prices

Today however, the European economic releases are likely to be less supportive for the metals prices

ZINC

Zinc has also lost the ground near a percent at the LME and the same has been observed at MCX

Fundamentally, Zinc has got weak spot demand which is less supportive for the prices

Besides, open interest are also getting declined continuously. Contango effect is also moving down. Considering all these we may expect prices to remain weak for the day