India Base Metals: All down, but nickel, on US-China trade deal woes

Thursday, Nov 21


By Rituparna Ghosh


NEW DELHI – Futures contracts of base metals–barring nickel–fell sharply today on the Multi Commodity Exchange of India and the London Metal Exchange due to fresh concern over a trade deal between the US and China, analysts said.


On Wednesday, Reuters reported that "phase one" of the deal is likely next year as both the countries are pushing for more extensive tariff rollbacks. 


The US House of Representatives, on Wednesday, passed two bills in support of pro-democracy protestors in Hong Kong even after China warned the US against interfering in its internal affairs. 


Uncertainty over US-China trade ties has weighed on the global economy and halted operations in the industrial sector.


Metals have come under pressure due to a weak outlook on the discussions between the two countries. The fall was, however, restricted after a Bloomberg report quoting China's chief trade negotiator said the country remained "cautiously optimistic" about the trade deal.


A fall in prices of copper was restricted as data by International Copper Study Group showed global demand for refined copper exceeding production by 330,000 tn in the first eight months of 2019. A deficit of 268,000 tn was recorded in the year-ago period.


Prices of aluminium remained under pressure for the nine straight trading day as the supply of the metal at the LME-monitored warehouses was at 1.2 mln tn, well above the psychologically crucial mark of 1 mln per tn. 


Concern about a rise in aluminium output next year worsened the decline in prices of the metal.


China's output of aluminium will rise 3.5% to 37.23 mln tn next year, resulting in a surplus for the domestic aluminium market, China Nonferrous Metals Industry Association said.


"We believe China will, therefore, seek to continue exporting large amounts of aluminium, especially semi-finished products, meaning that the global market should also be amply supplied. This is one of the reasons why we see virtually no upside potential for aluminium prices next year," Commerzbank Industrial Metal Analyst Daniel Briesemann said in a note.


Nickel was the only metal that rose today due to low-level buying by investors after its prices declined for six days, analysts said. 


Market participants said investors added nickel to their positions owing to upbeat fundamentals as the metal continued to slide towards the 200-day moving average at $14,250 a tn on the LME.


Nickel is a key raw material for electric vehicle batteries. Global demand for the metal is seen rising with the adoption of electric vehicles in the automobile industry.


Prices of nickel have also declined sharply in the last few days due to a rise in the near-term supply of the metal and weak near-term demand concerns.


Commerzbank AG had pegged the near-term demand for the metal to grow at 5%, adding that such demand is unlikely to absorb the estimated supply growth of 8% next year. 


At 1745 IST, on MCX, the November futures contract of:
–aluminium was at 130.5 rupees a kg, down 0.4%
–copper was at 432.4 rupees a kg, down 0.6%
–lead was at 153.3 rupees a kg, down 0.4%
–nickel was at 1,072.1 rupees a kg, up 0.5%
–zinc was at 186.1 rupees a kg, down 0.5%



The November contract of copper is seen trading at 430-440 rupees per kg on the MCX, and nickel at 1,070-1,090 rupees. The same-month contract of zinc is seen at 185-190 rupees a kg in the evening session, Angel Broking said.  End


US$1 = 71.76 rupees

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


Edited by Charumathi Sankaran


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