Base metal prices ended with higher with the exception of lead which ended lower on the back of huge build-up of inventory on London Metal Exchange.
Economic data in the form of manufacturing numbers from US and ZEW economic sentiment from Euro zone came in largely positive thereby supporting base metal prices.
US equity markets ended with gains of half a percent on the back of upbeat manufacturing data. Taking cues most of the Asian equity markets are trading on the higher side.
Dollar index is trading down by 0.45 percent on the back of rebound in the Euro. Euro continues to move higher as equity markets rallied there strongly owing to successful auctions by peripheral European nations. All this has sent the prices of base metals higher in the morning session on LME.
On the fundamental front, copper production by Rio Tinto in the fourth quarter of 2010 declined by 9 percent owing to lower ore grades and temporary shutdown.
On the economic data front, housing starts from US are expected to decline from prior month while the building permits are expected to continue to rise thereby indicating improving housing sector.
Overall, we expect base metal prices to remain on the higher side.
ALUMINIUM
After declining by 3,650 tonnes on the previous day, aluminum stocks on London Metal Exchange rose by 30,625 tonnes
On the fundamental front, Rio Tinto’s fourth quarter aluminum production remained flat at 962,000 tonnes
The cancelled warrant ratio though has declined it seems to be stabilizing and thereby stocks might continue to witness draw downs
COPPER
Copper stocks witnessed draw down of 1,075 tonnes as against build-up of 2,775 tonnes on the previous day on London Metal Exchange. Stocks movements have become uneven despite strong cancelled warrant ratio
On the fundamental front, Rio Tinto’s fourth quarter CY 2010 copper production declined by 9 percent to 185,200 tonnes
Open interest rose only marginally along with rise in prices indicating build –up of long positions
LEAD
Lead was the only loser among the base metal pack as huge stock build up was witnessed
Lead stocks on London Metal Exchange rose by a huge 29,825 tonnes as against build-up of 3,150 tonnes on the previous day. The total stocks now stands at 243,950 tonnes thereby marking an increase of close to 14 percent in a single day
As expected, the calendar spread has moved to +0.10, i.e., the market has moved back into contango. The spread gas further potential to move higher i.e., Feb outperforming the Jan contract
NICKEL
Nickel inventory on London Metal Exchange witnessed draw down of 414 tonnes and prices touched there eight month highs
On the fundamental front, Societe Le Nickel of Caledonia accounts for 5 percent of world’s nickel production has resumed operations which were disrupted owing to cyclone. However the company continues to remain on alert
Open interest rose along with price indicating long build up. Volumes were also on the higher side
ZINC
Zinc stocks on London Metal Exchange rose by 1,450 tonnes as against modest decline of 50 tonnes on the previous day
Cancelled warrant ratio continues to remain at 0.25 level, indicating that the movement in inventory would remain on the negative side (i.e., build-up might been seen)
Mitsui Mining & Smelting Co., Japanese largest smelter would cut output as the company plans to shut the smelter for two months in the next fiscal owing to maintenance
