Base metal prices ended mixed with lead and zinc prices gaining more than a percent while aluminum prices declining by 1.5 percent. Trade deficit of US widened in the month of December while the Michigan confidence came in better than expected thereby boosting sentiment.
On Friday, US equity markets ended with gains of half a percent as Dow Jones ended at the highest level since June 2008. Tensions eased as Egypt’s president resigned and thereby boosted equity markets.
Taking cues most of the Asian equity markets have also opened on the higher side. Japanese economy contracted by 1.1 percent in the last quarter of 2010 as against expectation of contraction of 2 percent.
Dollar index is currently trading lower by 0.14 percent at 78.33. In the morning session on LME, base metal prices are trading on the higher side with gains of close to half a percent.
On the fundamental front, World’s largest aluminium producer, Rusal, indicated that aluminum ETF could be launched soon. Launch of ETF is expected to boost investment demand for the metal and thereby might reduce some of the metals from the warehouse.
On the economic data front, India’s WPI data is expected to indicate moderation in inflation. From Euro-zone industrial production data is expected to indicate contraction. Overall, given the positive equity markets and lower dollar index we expect base metal prices to remain on the higher side.
Aluminium
Aluminum was the top loser among the base metal pack as it ended with losses of more than one and half percent.
Aluminium stocks witnessed draw down of 2,325 tonnes as against build-up of 1,125 tonnes on the previous day on London Metal Exchange.
For the whole week however stocks rose by 68,475 tonnes. Warehouses in China also witnessed build-up of 1,472 tonnes.
Copper
Copper stocks on London Metal Exchange witnessed draw down of 225 tonnes as against build- up of 550 tonnes on the previous day.
For the whole week stocks rose by 2,575 tonnes and the warehouses in China also witnessed build-up of 9,899 tonnes.
The cancelled warrant ratio is still moving lower indicating that the stocks might continue to witness build-up in the near term.
Lead
Lead was the top gainer among the base metal pack as it ended with gains of two percent on the back of short covering.
Lead stocks on London Metal Exchange rose for 15th consecutive session. Stocks rose by 275 tonnes as against increase of 1,800 tonnes on the previous day.
For the whole week also stocks rose by 5,775 tonnes thereby taking the total stocks to 295,050, highest level since April 1995.
Nickel
Nickel prices ended with gains of one and half percent on LME however the gains in the Indian markets were limited to half a percent.
On London Metal Exchange, nickel stocks witnessed draw-down of 786 tonnes as against decline of 432 tonnes on the previous day.
Open interest declined despite prices rising and thereby might have limited the gains in the Indian markets.
Zinc
Zinc stocks declined by 225 tonnes as against decline of 150 tonnes on the previous day on the previous day on London Metal Exchange.
Warehouses in China witnessed build-up of stocks 410 tonnes as against decline of 1000 tonnes on London Metal Exchange.
As expected in the previous day’s report, the lead-zinc spread moved higher from 4 to 5.45 levels on the back of outperformance of lead. This spread has further potential to move higher.
