Karvy Comtrade Limited METALS INSIGHT A Daily Report on Base Metals

REVIEW AND OUTLOOK
Base metals ended lower on concerns that the demand from China might fall as data indicated cooling of property market. Chinese imports also grew at a slower pace indicating the domestic demand is weak.

US equity markets ended in red and taking cues Asian Equities have also opened lower side. However, losses are being pared by most of the markets as the Asian markets have already fallen yesterday discounting the outcome from FOMC meet. Fed has downgraded its view of the economic outlook as fears of double-dip recession have increased. In the morning session on LME, base metals are trading slightly on the higher side. From China, both the industrial production and retail sales in the month of July grew at a slightly lower pace than in the prior month. This is indicating that growth is slowing down. Also the price rise, as indicated by PPI is slower. Lower level of inflation is boon for the economy as the pressure on the government to tighten significantly will alleviate. Overall, given the fall witnessed yesterday, we at KCTL, expect the base metals to bounce, though the gains might be capped.

ALUMINIUM
LME inventory witnessed draw-downs to the extent of 5,175 tonnes
On the fundamental front, Chinese imports of aluminium for the month of July came in at 67,462 tonnes, a fall of 9.60% from the previous month The basis on LME continues to remain at lower levels indicating that upside in prices might be limited in the near term.

COPPER
Copper inventory on LME witnessed draw-downs of 2,100 tonnes
On the fundamental front, Chinese imports of copper grew by 4.5% to 342,901 tonnes. However on a year-on-year basis, imports were lower by about 16% The cancelled warrant ratio continue to decline indicating that there might be build-up of inventory in the near term.

NICKEL
LME inventory witnessed draw-downs to the extent of 240 tonnes
The cancelled warrant ratio on LME are declining indicating that there might be build-up in the near term
Both the basis on LME and calendar spread on MCX are ticking upwards indicating expectation of higher price in the near term