Base Metals: Remains bullish, positive data to add fuel

Bullish sentiment in the base metals complex continued on Wednesday as prices remained firm. Ever-rising inventories had little effect on the upside momentum. Supply worries inflamed Aluminum and Nickel that rose to nine and eleven month highs respectively.

Aluminum prices gained 2.2% till 4.15 p.m. IST as worries over South African smelter output being affected by a possible strike lifted prices to $2,042 on the LME. Nickel reached its best level since September last year to $19,821 as supply worries gave support. Supply of nickel from Vale Inco has been disrupted from its Sudbury operations in Ontario, Canada. The strike at Sudbury, as well as at Vale affects roughly 10% of global nickel production.

There is plenty of upward momentum as manufacturing conditions improved in China and is stabilizing in the US. This factor is providing more legs to the rally.

LME total warehouse inventories jumped to a fresh record high of 5.851 million tonnes today, following chunky increases in Zinc, Aluminum and Lead.

Outlook

Further positive news on the economic front is likely to add fuel to the rallies. However, poor news could knock down prices as given the sharp rise in prices, correction could come in. The US is expected to announce data on non-farm employment change at 5.45 p.m. IST, factory orders and non-manufacturing PMI at 7.30 p.m. IST today. Factory orders are expected to decline and this negative data could make base metals come under pressure. Prices have raced too far too fast and any poor news could push prices lower.

Courtesy: Angel Commodities

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