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India Base Metals:Nickel dn on fears of spike in supply till Dec-end

Monday, Sep 16

 

By Rituparna Ghosh

 

NEW DELHI – Futures contract of nickel on both Multi Commodity Exchange of India and London Metal Exchange fell over 2% today on concerns of a rise in supply before Indonesia's nickel export ban comes to effect from Jan 1, analysts said.

 

Indonesia is seen incentivising the export contracts before the ban comes into effect. Major miners have also reported raising production. 

 

According to media reports, several other miners including Vale in Brazil, are also set to restart nickel processing to meet global demand. However, investors ruled out any sharp movement in prices owing to the slowdown in demand from China's auto industry.

 

China is the world's largest consumer of industrial metals. 

 

Base metals started the day in the red after data showed China's industrial  production fell to its slowest pace in 17 years. The data showed growth in industrial production in August slowed to 4.4% from 4.8% in July.  

 

Metal prices further took a hit after risk appetite worsened, following the sharp rise in crude oil prices after drones strikes on Saudi Aramco's oil fields. The attack forced the country to cut its oil production by half, reducing global supply by over 5%.

 

Following the report, crude oil soared nearly 20% earlier today, and the rupee fell by almost 1%. 

 

Given that India is a net importer of crude oil, a rise in its prices would exert pressure on the Centre's finances and weaken the rupee. The rupee fell to 71.63 earlier in the day, before closing at 71.59 rupees a dollar. 

 

A weak rupee against the US dollar makes dollar-denominated base metals costlier for holders of the Indian currency, and weighs on its demand. A weaker currency along with growth headwinds would dent investor sentiment.

 

However, zinc futures both on the MCX and LME rose on talks of a supply shortage. 

 

According to media reports, Newmont Goldcorp, a US-based mining company, said on Sunday that it had temporarily suspended operations at its Penasquito gold mine in Mexico due to an illegal blockade. The miner was expected to produce 111,130 tn of zinc this year as a by-product.

 

At 1740 IST, on MCX, futures contracts of:
–Sep aluminium was at 140.1 rupees a kg, up 0.2%
–Sep copper was at 459.3 rupees a kg, down 0.2%
–Sep lead was at 156.5 rupees a kg, up 0.3%
–Sep nickel was at 1,221.0 rupees a kg, down 1.6%
–Sep zinc was at 188.4 rupees a kg, up 0.4%

 

OUTLOOK

Investors would be eyeing the US Federal Reserve Open Market Committee meeting on Sep 17-18 with the expectation that policymakers will cut the benchmark interest rate by at least 25 basis points for the second time.

 

Low interest rates reduce the cost of borrowing and boost growth, which augurs well for metals. 

 

The September copper contract on MCX is seen trading in a range of 447.4-470.2 rupees per kg and the nickel contract is seen in a range of 1,178.9-1,304.3 rupees. The September zinc contract is seen in the range of 187.0-191.1 rupees a kg in the evening session, Geojit Financial Services said in a note.  End

 

US$1 = 71.59 rupees

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

 

Edited by Nidhi Chugh

 

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