Base metals fall 15-25% in 2 months

Mounting concerns over the global economic growth, coupled with mixed sentiments in the world markets, have led base metals to trade lower in the past two months.

Nickel led the pack with a decline of 25.56 per cent since August, to trade at $18,670 a tonne. Copper and aluminium, however, fell by 23.39 per cent and 15.79 per cent, respectively. Copper, the leader of the base metals quartet, declined mainly on the back of demand concerns for the metal in the Western world.

According to reports, Americans are worried about their incomes, as they struggled to find work in September, holding consumer confidence at a near-30-month low and pointing to weak spending in the coming months. Falling economic sentiment in the euro zone continues to remain a cause of concern for base metals, as the growth in Western economies tracks base metal prices proportionately.

The metal used in power and construction plunged to a 14-month low of $6,800 a tonne on Monday, as panic selling on fears of Greek default and the euro zone crisis accelerated.

Pushing through a crucial reform of the euro zone rescue might cause German Chancellor Angela Merkel to lose a majority in her own coalition, a test vote showed. Such an outcome could weaken her ability to push through future rescues.

Markets focused on international auditors heading for Athens, to inspect the Greek government’s austerity plan, while a German suggestion that a new bailout might be renegotiated caused much consternation. Greece’s ruling party forced through a deeply unpopular property tax to lure international lending inspectors back to Athens to release vital aid.

Euro zone money supply and loans to the private sector grew at a faster pace in August than in the previous month, weakening the case for an interest rate cut next month.

Meanwhile, China’s growing economy has risen hopes for base metals to recover in future. According to Nick Moore, head of commodities research at RBS, “Fundamentals continue to remain favourable, one has to be encouraged by increasing net refined Chinese copper imports, which have risen for four consecutive months.”

China which accounts for about 40 per cent of copper demand, imported 235,509 tonnes of the red metal, a rise of 21.2 per cent from August to reach their highest level since January. China accounts for about 40 per cent of the global demand estimated at around 19 million tonnes this year, western Europe consumes about 15 per cent and the US 10 per cent.

Copper has declined nearly 30 per cent since hitting a record high of $10,190 a tonne on February 15, as investors piled into the metal on expectations of a supply shortage this year and next.