Base metal prices ended higher with gains of close to one percent on the back of short covering along with positive economic data. Higher Consumer confidence and Chicago purchasing manager from US also came in higher thereby supporting prices to trade higher.
US equity markets ended modestly lower however they pared some of there gains after consumer confidence improved. Asian equity markets are trading mixed with Taiwan and Shanghai trading higher while other markets are trading modestly lower.
Chinese PMI manufacturing data came in better than expected and thereby might further support base metal prices to trade higher. In the morning session on LME, base metal prices are trading mixed with Zinc and lead trading higher with gains of close to a percent while other metals are trading modestly lower.
On the economic data front, German retail sales and PMI data is expected to come in positive. However in US ISM manufacturing is expected to moderate slightly and contraction in construction spending might been seen.
The ADP employment numbers might indicate job additions and might provide cues as to how the non-farm payrolls data due to released on Friday might turn out.
Overall, base metal prices in Indian markets might open on the lower side given the stronger rupee, but expectation of positive economic data might send base metal prices higher.
ALUMINIUM
Aluminium stocks on LME witnessed build-up of 6,800 tonnes as against decline of 2,800 tonnes on the previous day.
The cancelled warrant ratio continues to remain strong and thereby the increase in stocks might be one of and the stocks are expected to continue their declining trend.
The prices moved higher along with increase in open interest indicating continuation of up move.
COPPER
Inventory on London Metal Exchange declined by 800 tonnes as against decline of 450 tonnes on the previous day.
Copper market continues to remain in backwardation which usually indicates tight supply conditions in the near term.
This is also supported by the fact that the world’s third largest copper mine Collahuasi which is based in Chile is witnessing workers strike. Production as of now is normal but prolonged strike might have raised fears of disruptions. The basis has declined to as low as -$60/tonne.
LEAD
Inventory of Lead on London Metal Exchange witnessed decline of 175 tonnes.
The cancelled warrant ratio has bounced back strongly indicating that the stocks on LME might continue to witness draw-down in the near term.
As expected the lead-zinc spread declined to as low as 4, however lead prices did pick up later and thereby the spread moved back to 5. We expect that the spread now has potential to move higher given the stronger cancelled warrant ratio.
NICKEL
Nickel Inventory on London Metal Exchange witnessed a modest decline of 42 tonnes as against decline of 564 tonnes on the previous day.
The cancelled warrant ratio is also moving higher but need to watch for some time before deciding on the probable inventory movement.
The basis continues to remain at average levels thereby giving no clear direction but the bias is on the positive side for prices.
ZINC
Zinc stocks on the London Metal Exchange witnessed decline of 325 tonnes.
The basis on LME has declined sharply to $5/tonne indicating that more and more participants are expecting prices to remain on the lower side.
The open interest rose along with acceleration in price indicating that the price might continue to move higher.
