Base metals fall on global crisis

Prices decline 13-31% this year on euro zone problems; nickel is the worst performer losing 31% .

Base metal prices fell 13-31 per cent so far this calendar year on receding hopes of recovery in the euro zone economic crisis.

The price of aluminium declined 13 per cent to $2,140 a tonne on Friday as compared to $2,461 in the beginning of this year. While the price of nickel plunged by 30.69 per cent to settle on Friday at $17,300 a tonne from $24,960 early this year.

“Aluminum prices declined five per cent in November as compared to previous month, impacted by the weakness in overall base metals complex. Fundamentals remained fairly balanced with world demand increasing six per cent until September, while supply increased five per cent,” said Amar Ambani, head of research, India Infoline, a commodity broking firm.

The global surplus persists at 954,000 tonnes during the first nine months of this year, as compared with 1.16 million tonnes during the same period last year. On Chinese front, supply growth outpaced domestic demand, with surplus expanding to 330,000 tonnes until September, as compared with 191,000 tonnes during the same period last year.

Supply glut persists at the exchange warehouses, where LME stocks remained at gigantic levels of 4.5 million tonnes. Additionally, a substantial quantity of the white metal is also estimated to be deposited in the unregistered warehouses across the world.

On the price front, existing price levels are proximal to the production costs, where relatively higher energy prices can compel producers with low scale of economies to shut down production capacity. In this regard, aluminium prices have a limited downside, in spite of the substantial global surplus.

A recent report by India Infoline said, “Nickel has been the worst performer during November, with prices registering 11 per cent decline from previous month. On the global front, nickel supply outpaced demand on a marginal basis during the first nine months of this year, with supply growing at 18 per cent while demand rose 16 per cent. Similarly, Chinese supply grew at 53 per cent while demand took a spurt of 43 per cent. Moreover, its major user stainless steel output across the globe is clearly showing signs of stagnation, which has raised demand concerns.”

Copper prices registered moderate decline of one per cent in November, suppressed by looming economic uncertainty in Europe. China’s refined copper imports rose 7.2 per cent in October from the previous month which kept the price slightly up, however imports for the first 10 months of this year were down 15 per cent.

Meanwhile, the World Bureau of Metal Statistics (WBMS), the leading monthly publication of base metals demand and supply figures, reported that global copper market had a surplus of 237,000 tonnes in the first nine months of this year, compared with a deficit of 148,000 tonnes during the same period last year. Global surplus of aluminium remains at 954,000 tonnes during January-September as compared with a surplus of 1.16 million tonnes in the same period last year.

Zinc market surplus expanded to 575,000 tonnes in the first nine months of this year as compared with a surplus of 225,000 tonnes during the same period last year. Lead market surplus was aggravated and registered at 47,000 tonnes during from an oversupply of 11,000 tonnes. Nickel markets have witnessed moderate surplus of 8,000 tonnes as compared with a deficit of 17,000 tonnes between January and September of the previous year.

The outlook of the base metals depends upon the improvement in financial market, an analyst said.