Base metal prices ended higher with gains of anywhere between half to two percent, with the exception of aluminium which ended modestly lower. Pending home sales from US came in way above expectation thereby supporting base metal prices.
US equity markets ended with gains of close to a percent on the back of positive economic data and continued buying interest. Asian equity markets have however opened modestly on the higher side and are witnessing consolidation given the strong gains in the past few days.
China’s non-manufacturing PMI came in at 53.2, far below the prior number of 60.5. This has sent the base metal prices lower, with average losses of close to half a percent, in the morning session on LME.
On the economic data front, PMI data from Euro-zone is expected to largely remain unchanged while the retail sales are expected to rise. The crucial data to watch will be the non-farm payrolls data from US which is expected to indicate job additions.
The unemployment rate is however expected to remain unchanged. ISM non-manufacturing composite and factory orders might give opposite indications.
Overall, we expect base metal prices to open on the lower side; however pull back in the later hours might be witnessed on the back of positive non-farm payrolls data.
ALUMINIUM
Aluminium stocks on LME witnessed draw-downs of 4,450 tonnes as against increase of 625 tonnes on the previous day.
The cancelled warrant ratio continues to remain at healthy levels indicating that the draw-downs might continue.
The open interest declined along with modest decline in prices indicating profit booking at higher levels.
COPPER
Inventory on London Metal Exchange declined by 2,425 tonnes as against decline of 900 tonnes on the previous day.
Copper market continues to remain in backwardation indicating 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 currently stands at -$55/tonne.
LEAD
Inventory of Lead on London Metal Exchange witnessed modest decline of 25 tonnes.
The cancelled warrant ratio continues to remain at higher levels indicating that the stocks might continue to decline.
The open interest rose along with increase in price indicating long build-up and potential for prices to move higher.
NICKEL
Nickel Inventory on London Metal Exchange witnessed decline of 1014 tonnes as against build-up of 936 tonnes on the previous day.
The inventory movement on London Metal Exchange continues to remain uneven and the cancelled warrant ratio has also been very volatile thereby giving no clear direction as to future inventory movement.
ZINC
Lead along with zinc were the top gainers among the base metal pack.
Zinc stocks on the London Metal Exchange witnessed huge build-up of 2,450 tonnes.
The basis on LME has started to move back lower and currently stands at $8/tonne.
