In a volatile session, base metal prices ended lower with losses of anywhere between one to two percent. After trading higher initially on the back of debt ceiling deal reached in US, base metals pared all of the gains after data indicated weak manufacturing numbers from US.
ISM manufacturing numbers came in at 50.9 as against expectation of 54.5 and prior months reading of 55.3, thereby weighing on metal prices. Dollar index also rebounded and ended higher with gains of half a percent.
US equity markets ended largely flat but remained quite volatile as agreement on debt ceiling and economic data pulled indices on the opposite side. Taking cues, most of the Asian equity markets are also trading on the lower side with losses of more than a percent. Dollar index is trading modestly lower as uncertainty regarding the debt rating of US still looms.
In the morning session on LME, base metal prices are trading on the lower side. On the fundamental front, strike in copper mine in Escondida continues owing to disagreement over the bonus. On the economic data front, manufacturing numbers from major countries like US, Germany and China has been indicating moderation in growth.
UK’s PMI construction numbers are expected to indicate moderation in growth. From US, personal income is expected to indicate slight decline in growth while personal spending might witness some rebound. Overall, weak manufacturing numbers along with resurgence on concerns about credit rating of US, base metal prices are expected to remain weak, however volatility might continue.
Aluminium
Aluminium prices ended lower with losses of more than a percent on both LME and MCX.
Aluminium stocks from London Metal Exchange witnessed draw-downs of 7,650 tonnes as against decline of 8,175 tonnes on the previous day.
On the fundamental front, smelters in Henan Province, China’s top producing region of aluminium, are facing electricity supply cuts and thereby could hit the output.
Copper
Copper prices remained quite volatile and sharp movements on both the side were witnessed. Prices ended lower with losses of nearly 2 percent on LME and 1.3 percent on MCX.
Copper stocks on London Metal Exchange witnessed draw-downs of 525 tonnes as against decline of 1,800 tonnes on the previous day.
On the fundamental front, workers strike at Escondida mine in Chile continues for the 11th consecutive day now.
Lead
Lead prices declined by 1.8 percent on LME and more than two percent on MCX thereby underperforming the entire base metal pack.
Lead stocks from London Metal Exchange witnessed draw-downs of 775 tonnes as against decline of 475 tonnes on the previous day.
On the fundamental front, preliminary numbers from the Indian automobile companies is indicating weakening of demand in the month of July.
Nickel
Nickel stocks from London Metal Exchange witnessed build-up of 558 tonnes as against decline of 390 tonnes on the previous day.
Cancelled warrant ratio however continues to remain at average levels of 4 percent of total stocks.
Open interest declined by nearly 3 percent indicating that unwinding of positions which sent the prices lower.
Zinc
Zinc prices declined by more than a percent on both LME and MCX.
Zinc stocks from London Metal Exchange witnessed decline of 225 tonnes as against draw-downs of 500 tonnes on the previous day.
As expected, the lead-zinc spread declined to levels of 5 on the back of underperformance of lead. This spread has been declining from levels of 15 and thereby cautious approach should be taken now.
Courtesy: Karvy Commtrade Ltd.
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