Base Metal Updates ( Copper Tips )

Copper & other Base Metals may rally too:

Copper & other Base Metals may also rebound from recent slumps to rise substantially on expected easing from China, the world’s largest consumer of Base Metals. There have been reports that Chinese leader Wen Jiabao said China may have to ease monetary policy soon. Copper production in 2012 has picked up, but not to the level that industry expected. Scrap supply has become the savior of the copper market for the past two years, bridging the gap between growing Copper demand and stagnant mine supply. Chilean Copper production is starting to pick up after a shaky start to the year, with a rise of 2.5% in the first half of 2012 in the world’s largest copper-mining country. Chinese Copper production is running higher than expected, growing at 20% year-over-year. Copper Trading remains on the weaker side yet because of the modest global growth seen in the first half of 2012.

Data out of China shows Lead acid battery production rose by 45% year-over-year in July alone and has risen 25% year-to-date. This should be supportive for the Lead market. Battery production represents nearly 70% of total Lead demand in China. Lead supplies have tightened because of the strength of demand, and its likely solid demand will continue into year end.

Zinc News

World Bureau of Metal Statistics (WBMS) showed that zinc market was in surplus by 217000 tonnes during January to August 2012 which compares with a surplus of 566000 tonnes recorded in the whole of the previous year. Reported stocks rose by 56000 tonnes in the first eight months of the year with almost all of the increase recorded at LME warehouses. LME stocks represented 75 percent of the global total.

Production of locally refined metal in China fell by 7.4 per cent compared with the previous year. According to Chinese customs data, imports remain at historically high levels. Much of the Chinese imports originate from other Asian countries. Exports reported by Japan, South Korea and Taiwan confirm the Chinese imports.

Global refined production fell by 3.1 percent and consumption fell by 0.9 per cent compared with the levels recorded one year earlier. Japanese demand was, at 291.9 kt, 12.6 per cent below the equivalent total for January to August 2011. In August 2012, slab zinc production was 1.036 million tonnes.

World demand was 74000 tonnes lower than corresponding period previous year to 8.11 million tonnes. Chinese apparent demand was 3.49 million tonnes, which is just over 43 per cent of the global total. Chinese demand rose by 1.7 percent compared with the first eight months of 2011. In August 2012, slab zinc consumption 1.063 million tonnes.

Zinc Trading Level's

ZINC OCT TRADING LEVELS FOR MORNING SESSION

S1 RS 99.50, S2 RS  98.90 , S3 RS 98

R1 RS  101.50 , R2 RS 102.45. R3 RS  103.25

MCX Copper Updates

MCX Copper futures are trading on a weak note following the frail outing for world equities and a sell off in the LME copper futures as global economic worries stayed in focus and the US dollar maintained its firm tone. The anti austerity protests turned ugaly in Greece and Spain and the Spanish 10-year Government bond yield jumped back over 6% on news that Catalonia wants to leave Spain. The LME Copper is down $93 or 1.10% to trade at $8161 per tonne right now.

The Spanish worries hit the stock markets in Europe hard and the major indices are down around 1.5-2%. Spanish stocks plummeted by 3.40% on the Catalonia effect. The Euro tumbled to 1.2850- its two-week low level on these cues. Germany cleared the last legal hurdle to ratifying the euro zone's new bailout fund on Wednesday with a cabinet declaration that addresses concerns raised by the country's Constitutional Court, according to media reports. However this was already factored in the market and the Spanish worries seemed to be the sole factor driving the market forces today.

LME Copper fell through the 8200 levels and gave up bulk of its yesterday's gain. The metal is holding on quite tenuously amid weak cues from equities and could fall further if equities turn in further bearish. Reports of Chinese bonded copper inventories surging to record highs are not helping the red metal much either.

In other metals, Zinc, Lead and Nickel are down more than 1% each. MCX Copper futures for November yet again failed to hold on around Rs 445 levels and fell in the afternoon trade. The counter quotes at Rs 442.25, down Rs 2.75 or 0.62% on the day. There has been a sharp rise of 6.80% in the open interest for the counter indicating heavy short selling as a critical break under Rs 450 in last week turns the sentiments bearish.

Zinc Tips

Zinc Tips :-

Remote prospects of demand for Zinc in short term has resulted in the metal going into a contango from backwardation in June, earlier this year. The metal has been hard hit by the rising steel stockpiles and lack of demand. Enough doubt on Chinese buying and continued ailment of Eurozone due to debt crisis has invoked short term fear in metal traders.
The change of Zinc from backwardation to contango also occurred as traders entered into long term financing deals in order to save them from uncertainty in present juncture. This limited the selling in London forwards that would have been more cruelsome in the absence of such deals.
The LME three month Zinc forwards were in a backwardation of $ 6 per tonne in mid June, but from there on the cash prices slipped sharply and Zinc is now in contango of $ 32 per tonne as of 8 October 2012. Since Mid August gap between cash and forwards have widened from $ 20 per tonne. The inventories of LME Zinc have increased by 21% in 2012 to 996225 tonnes. LME Zinc forwards were trading at $ 2042 per tonne on Monday, 8 October 2012, compared to $ 2010 per tonne in cash markets.
The major beneficiary in all this ambiguity has been domestic Zinc prices. The fall in Rupee has limited the blow on Zinc this year. Earlier in the year, lack of policy inaction by the UPA government led Rupee to weaken towards 57 against the Dollar. The sharp decline in Rupee made prices of Indian metals dearer for exports supporting the metal. Indian Zinc futures have increased by 7.4% this year to Rs 106.3 per kg. However from September profit booking and strength in Rupee has declined this metal from top of Rs 112.7 per kg in September 2012.