Base Metal prices are trading higher with gains of anywhere between one to three percent on the back of supportive economic data and lower dollar index. Personal spending in the US rose along with pick up in the Chicago purchasing manager’s index.
US equity markets ended higher with gains of half a percent on the back of positive economic data and some strong corporate earnings. Taking cues most of the Asian equity markets have also opened on the higher side and dollar index is trading lower by 0.2 percent at 77.6. This has sent base metal prices higher in the morning session on LME. They are trading with gains of close to half a percent.
On the fundamental front, Queensland Nickel Pty has begun a staged shutdown owing to threat of cyclone. The refinery has a capacity of 30,000 tonnes of nickel. This has raised fears of supply disruption and thereby would support base metal prices. On the economic data front, Chinese PMI numbers came in modestly lower and the other PMI numbers from euro zone are expected to come in largely unchanged.
From US, ISM manufacturing numbers are expected to come in higher along with ISM prices paid. Overall, given the expectation of manufacturing numbers and concerns about supply disruption, we expect base metal prices to remain on the higher side.
Aluminium
For sixth consecutive day, aluminium stocks declined on London Metal Exchange. Inventory witnessed draw down of 3,450 tonnes.
The cancelled warrant ratio is stable indicating that stocks might continue to witness draw-downs in the near term.
Price rise was accompanied by huge increase in open interest along with volumes indicating long build up.
Copper
Copper stocks on London Metal Exchange witnessed draw downs of 4,050 tonnes, the first in past six days.
The cancelled warrant ratio has however declined drastically indicating that stocks might witness lower inventory declines or even build-up.
On the fundamental front, Japan’s copper refined copper exports in the month of December, fell by 23 percent to 31,180 tonnes.
Lead
Lead stocks on London Metal Exchange rose for sixth consecutive session. The pace of stock increase however declined to by 900 tonnes as against 2100 tonnes on the previous day.
The cancelled warrant ratio continues to drift lower indicating that the stocks build up might continue in the near term.
The basis on LME has increased sharply i.e., the premium in the spot market has risen to $92/tonne thereby giving contradictory view as against the stocks increase.
Nickel
Nickel stocks witnessed draw down of 258 tonnes as against decline of 888 tonnes on the previous day.
The cancelled warrant ratio though declined modestly but continues to remain near average levels.
Nickel prices ended with gains of more than two percent along with increase in open interest by more than 80 percent indicating continuation of up move.
Zinc
Zinc was the top gainer among the base metal pack as it ended with gains of more than 3 percent on LME and 2.7 percent on MCX.
Zinc stocks on London Metal Exchange witnessed a decline of 250 tonnes for sixth consecutive day.
On the fundamental front, Japan’s refined zinc exports in the month of December rose by 43.7 percent to 8,528 tonnes. This is the first gain in the last 12 months.
