According to analysts, prices for aluminium, copper, nickel, lead and zinc are all set to outsmart gold prices this year as industrial demand for these base metals from emerging economies increases.

Chin and India are expected to play as the catalyst for base metals prices as these economies will see a huge increase in industrial growth this year.

India’s industrial growth in January was 16.7 per cent this year which is a big leap from last year figures.

Again, gold also may see some gains but not like base metals. Gold prices ware unlikely to fall below $1000 per ounce and there was potential for a rise beyond the current $1100/oz level.

Gold price is not going to do as well in relation to other commodities as it did in 2009. That doesn’t mean the gold price is going down, it is just that the relativities to other commodities which are much more leveraged to the industrial cycle are going to start catching up.

India’s industrial growth was primarily led by the manufacturing sector, especially for capital goods and consumer durables. The growth rate was 17.6 per cent, revised upwards from 16.8 per cent, for December 2009 and was at 1 per cent during the corresponding month in 2008. This means India will be needing more metals for its manufacturing sector in the coming months.

The manufacturing sector grew at a robust rate of 17.9 per cent in January as against a meagre growth of 1 per cent in the corresponding month last year. Mining and electricity also registered significant growth rates of 14.6 per cent and 5.6 per cent respectively during the month under consideration, as against 1.8 per cent and 0.7 per cent in January 2009.

Given a robust industrial growth rate which has been in double digits for four consecutive months and a high inflation rate, analysts expect monetary tightening measures in the fourth quarter monetary policy review on 20 April 2010.
courtesy www.commodityonline.com

Copper prices closed above $7500 on the LME as continued Chinese buying coupled with the first inventory decline in 52 days supported an upside in prices. Expectations of higher imports of base metals in China provided support to copper prices. Prices could continue to trade higher as upcoming data releases by China on Thursday include – GDP, industrial output and detailed trade data. Chinese economic data is expected to come on the positive side and may boost prices further.

OUTLOOK

Base metal prices will take cues from the movement in the dollar and economic data from the US today. Copper inventories on the LME witnessed a decline yesterday and a further decline could boost copper prices.

Copper – Copper prices are up with immediate support for MCX February contract seen at Rs.342.05. Further below, crucial support is seen at 339.80 levels. Whereas resistance is seen at Rs.347.25 levels & further upwards at Rs. 350 levels.

Zinc – Zinc prices are trading up with immediate support seen at Rs.112.05 levels for MCX January contract whereas crucial support is seen at Rs.111.30 level. Short-term resistance is seen at Rs.114.90 whereas major resistance is seen at Rs 115.40 levels.

Source: www.commodityonline.com

China has decided to go ahead with its plans to make use of the recession and prices fall, and stock base metals so that it can boost its future projects. This move has helped the prices of metals to go up.

Copper prices have benefited most from this shift in fortune and are already up approximately 25 per cent this year, compared to a decline of more than 50 per cent in 2008.

And Scotiabank’s base metals index was up 1.8 per cent in January 2009 after five consecutive months of declines.

Forget equities, get into currencies.Trade now

Thanks to a massive stimulus package, China has been buying huge quantities of metals, particularly copper — 300,000 tonnes so far, with an additional 900,000 tonnes expected — for its State Reserve Bureau to supply future development projects.

The Chinese economy is clearly boosting the market starting right now.

Added to that, a plan by the US central bank to pump more than $1 trillion into the American economy is driving the US dollar lower due to fears of inflation.

All goods priced in US dollars, including commodities, will have to rise because the US dollar is falling.

The buy-back of $300 billion of US government bonds will also help to ease the liquidity crunch and make it easier to borrow money and finance new projects.

Prices for copper, nickel and zinc soared in recent years until mid-2008 amid skyrocketing demand from surging economies like China and India.

But as the global financial crisis deepened through the end of 2008, prices for industrial metals slumped as demand for everything from appliances to cars to new homes fell.

At the end of the year, copper prices were down to approximately $1.50 per pound after reaching above $4 per pound in the summer, while zinc prices were approximately 50 cents per pound after reaching above $1.20 per pound in February. Nickel was approximately $4 per pound after hitting $15 per pound in February.

Last week, copper traded on the New York Mercantile Exchange was up to $1.82 per pound, zinc was 58 cents per pound and nickel was $4.56 per pound.

Several analysts believe the recent rise in prices indicates base metals prices have hit bottom and are on their way back up.

Many base metals miners, including Lundin Mining Corp. (TSX:LUN), HudBay Minerals Inc. (TSX:HBM), First Nickel Inc. (TSX:FNI), FNX Mining Co. Inc. (TSX:FNX) and Xstrata Nickel – responded to the slump in prices by temporarily shutting their less profitable mines.

Source: www.commodityonline.com

Copper price may stage some more recovery if LME warehouse copper inventories continue to drawdown. Though, recovery is unlikely to sustain for long owing to poor health of global economy and prevailing copper markets surplus.

Vedanta Resources Plc Chairman Anil Agarwal said he expects recession in the metal industry to continue this year. Aluminum continues to be a casuality of depression ropped to a seven-year low today as the global recession cut demand for vehicles and airplanes. Transportation is the biggest use of the lightweight metal, according to Citigroup Inc. China is expected to announce another bailout package worth $585-billion to aid its slowing economy. The aid is likely to increase investment in infrastructure and manufacturing sectors, according to reports. Towards weekend Aluminium gained marginally in India largest commodity bourse, MCX. Copper might fall this week on speculation that the worsening sentiment in the global economies could reduce demand for industrial metals.

Source: www.commodityonline.com

Aluminum inventories jumped a whopping 4.7% by 139,700 tonnes and crossed the three million tone mark. Despite of a sharp jump in inventories, the metal managed to end in the green. Copper prices bounced after a rare inventory decline of 0.2% that helped provide some relief to prices.

On the macroeconomic front, the US data was negative as housing starts and building permits dropped to record lows in January. The FOMC meet was also held yesterday and the Fed’s latest projection expects unemployment to rise as much as 8.8%. The FOMC also indicated that GDP could contract by up to 1.3% in 2009. This indicates a sharp contraction in economic activity.

OUTLOOK

With growing uncertainty over how long this recession could last, the base metals market seems to have factored in the most negative effect in its prices. We feel this because yesterday’s economic data was on the weaker side but some base metals like Copper, Zinc and Aluminum ended in the green. This is because markets already have discounted the worst case scenario and hence we expect them to remain range bound but the upside will be capped.

Inventory gain in base metals is bearish and this factor could also continue to cap the upside in prices. There could be some more production cutbacks as the surplus in most metals is rising. The strength in the dollar may put pressure on base metals as a stronger dollar makes base metals look unattractive and expensive for holders of other currencies.

On the macroeconomic front, the US is expected to announce data on Core PPI, PPI, initial claims, leading indicators and Philadelphia Fed today. Markets are expected to watch this data closely and may remain under pressure.

Source: www.commodityonline.com

Source: www.commodityonline.com

Source: www.commodityonline.com