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Informist, Wednesday, Jul 24, 2024

 

MUMBAI – The prices of base metals across the board have fallen in recent days and are currently at multi-month lows. However, this fall in prices may be exaggerated, as more than one factor comes into play curbing the supply and boosting demand, according to Commerzbank Research released Tuesday.

 

Reflecting the fall in prices, the index of the London Metal Exchange, which weighs the six non-ferrous metals traded on the LME, fell by 5.6% week-on-week and slipped below the 4,000 point mark last week for the first time since the beginning of April, it said in a report.

 

Copper recorded its biggest weekly decline in almost two years at 5.7% and ended the week at around $9,300 per tn, its lowest level in 3.5 months. Aluminium exhibited a weekly decline of more than 5%, with its price falling to its lowest level since the end of March at just over $2,300 per tn. Nickel’s prices declined 3.6% to a bit over $16,000, its lowest level since February. Zinc prices fell to a 3-month low of around $2,700 a tn, while lead declined to $2,100 a tn and tin to around $30,000 per tn, the report noted.

 

Weak Chinese economic data was an important factor bringing down the prices of base metals. The Chinese economy grew by just 0.7% in the second quarter compared to the previous quarter and 4.7% compared to the previous year. Signs of weakness emanated in particular from the retail and real estate sectors. “The latter is problematic for metals demand, as construction activity is of great importance for this,” the report said.

 

It further said that the hopes of short-term stimulus measures were dashed by the third Plenum of the Chinese Communist Party, which met last week. “The small interest rate cut by the Chinese central bank failed to turn sentiment around.”

 

Chinese exports of refined copper more than doubled last month, the report said, quoting data from the Chinese customs authority. Exports of unwrought copper and copper products also reached a record level in June. This has led to a sharp rise in copper inventories on the LME in the last two months, doubling since mid-May at 234,000 tn. Its exports of unwrought aluminium too rose, resulting in a build-up of Shanghai Futures Exchange inventories, the report said. However, the situation may change soon, the report said. “We consider the fall in prices for most base metals to be exaggerated...”

 

Explaining its view, the report said that the rate cuts by the central banks that have already been made, and those still to come in the coming months, should lead to an economic upturn, which should brighten the currently very negative market sentiment.

 

“On the other hand, the lower price level should put pressure on metal producers to curb production. The high level of production in China until recently is also likely to have been a consequence of the previously high prices,” it added.

 

Moreover, two Chinese smelters have recently announced significant production cuts in copper for next year, which would curtail the base metal’s supply, the report said.  End

 

US$1 = 83.72 rupees

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Abhijit Doshi

Edited by Saji George Titus

 

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