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India Base Metals: Down on weak demand outlook, oversupply concerns

Thursday, Mar 26

 

By Rituparna Ghosh

 

NEW DELHI – Futures contracts of base metals on both the Multi Commodity Exchange of India and the London Metal Exchange fell due to a weak outlook on demand for industrial metals, analysts said. 

 

Lower market participation following spread of the novel coronavirus also weighed on prices. Demand for metals has been extremely muted due to a slowdown in economic activity in many countries, Commerzbank AG said in a note.

 

According to market participants, risk sentiment for metals remains unstable as long as the number of infections keeps increasing. Globally, the virus has infected over 400,000 and killed more than 18,000 so far. 

 

However, investors also do not rule out the opportunity of buying the metals at a lower price level. "Admittedly, consumers may regard many metals prices as an attractive means of hedging themselves long-term against higher prices. All the same, we do not wish to exclude the possibility of further (and indeed in some cases pronounced) price falls in the short term. After all, the news backdrop relating to coronavirus is still too bad," Commerzbank AG said in a note.

 

Copper prices were down today as investors fear the possibility of an oversupply in the market, despite lockdowns in many producing countries.

 

According to Capital Economics, the global copper market is likely to see 5% contraction in demand and a surplus of over 1 mln tn of refined copper output this year, the largest surplus in the copper market since 2001.

 

Mining operations in South Africa have been suspended for three weeks and a two-day lockdown has been imposed in key mining regions of the Democratic Republic of the Congo. Several major copper miners in Chile and Peru have also reduced operations.

 

Prices of aluminium, lead, zinc, and nickel were also down today due to concerns of higher supply amid weak demand.

 

"In our opinion, the metal markets are likely to be characterised by surpluses for much of this year. And these will probably be upwardly revised in the case of zinc and lead given the low level of demand due to coronavirus. In the case of nickel, observers are likely to abandon their expectation of a deficit," Commerzbank AG added. 

 

However, broad-based weakness in the US dollar index limited the fall in metal prices. 

 

At 1730 IST, on MCX, the March futures contract of:

–aluminium was at 134.2 rupees a kg, down 0.4%
–copper was at 373.4 rupees a kg, down 0.8%

–lead was at 133.5 rupees a kg, down 0.1%
–nickel was at 862.2 rupees a kg, down 0.8%
–zinc was at 143.8 rupees a kg, down 0.5%

 

OUTLOOK

On the MCX, the March copper contract is seen at 350-380 rupees per kg. The same-month nickel contract is seen at 840-880 rupees per kg in the evening session and the zinc contract at 130-150 rupees per kg. The March aluminium contract is seen at 120-140 rupees per kg in the evening session, traders said.  End

 

US$1 = 75.15 rupees

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

 

Edited by Nidhi Chugh

 

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