Metals under severe pressure on fear of falling demand

Copper falls to a four-year low, dragging the other base metals; bullion finds support at lower levels

Base metals came under severe pressure in early Monday trade, with copper falling to a four-year low, dragging the rest of the complex lower. Industrial commodities are following crude oil prices, which fell to a five-year low as the exporting countries cartel, Opec, opted against a production cut despite the plentiful supplies.

Copper plunged through last week and approached a 2014 low as global commodities fell. It was the sharpest weekly fall since August, with a strike set to end at the Antamina copper mine in Peru and worries over slowing global growth, coupled with rising risk aversion in the markets. Metals tumbled as orders for business equipment unexpectedly dropped in America, the world’s second-biggest consumer.

Orders for non-military capital goods, excluding aircraft, declined 1.3 per cent in October. Investor confidence in the US is currently low, amid weaker than expected HSBC manufacturing and industrial data. Its Purchasing Managers Index fell to a six-month low at 50, down from 50.4 last October. A reading above 50 indicates expansion.

“Copper is trading in an oversold region and a technical bounce cannot be ruled out. Prices are expected to witness a bounce in the coming weeks amid bargain hunting,” said Sugandha Sachdeva at Religare Research.

Nickel declined after a union ruled out a strike at Colombia’s Cerro Matoso mine. Inventories monitored by the London Metal Exchange (LME) rose to a record for an eighth straight session, surging 52 per cent this year. The price has climbed 19 per cent this year on Indonesian supply concerns.

“Copper declined after growth in China’s manufacturing activity slowed more than expected in November. Also, rising risk aversion in the markets, along with a gain of 0.3 percent in LME stocks pressured prices,” said Prathamesh Mallya, senior research analyst with Angel Commodities Broking.

Zinc prices saw a sharp decline as weak Chinese economic data raised concern regarding demand. Also, the US trade deficit widened in September as exports hit a five-month low, a sign that easing global demand could undercut economic growth in the fourth quarter. Peru’s Volcan Compania Minera SA is raising zinc production capacity in a bet that prices will extend a rally as global demand outstrips supply of the metal.

Aluminium prices lost their appeal as ongoing concerns over the health of the global economy weighed on them, along with other base metals. Silver fell to its lowest since February 2010 at $14.65 before recovering to trade at $15.76 an oz, a rise of $0.3 from the previous close.

Gold was also lower at $1,146.80, its weakest since November 14, but recovered to trade at $1,178.7 an oz by the afternoon.

Gold in rupee terma ended with a marginal decline of Rs 100 to Rs 26,200 per 10g and silver gained Rs 200 on global recovery to Rs 36,000 a kg at Zaveri Bazaar here.