Metal prices: Volatility to continue

The CRB Commodity index, which represents 22 basic industrial commodities, has been range-bound, while being volatile in the last three months. This is likely to continue in the coming months due to a mix of bull and bear sentiment in user industries. The movement will also depend on the dollar’s value, which analysts say should remain subdued to the Fed’s soft interest rate policy.

Nickel and aluminium are forecast to gain as they had underperformed last year. The demand from the stainless steel industry, which consumes about two-third of the global nickel production for innovative rust-free applications in mega infrastructure projects, is estimated to further push up nickel prices, which are currently at an 18-month high. Stainless steel has also found huge applications in household utilities, including furniture, for its glossy look and also because it is almost maintenance-free. As a consequence, analysts believe raw materials like nickel chromium will remain firm in the coming months. Aluminium is likely to go hand in hand with nickel as the white metal has understandably received huge investments from optimists.

Copper, in contrast, is forecast to stay in the bearish mode as it has gained abundantly in the last fortnight due to lingering worries about supplies from top producer Chile. Indications of recovery in the global economy have already benefited the red metal. Its substitutes, such as plastics and aluminium, have already posed a threat to copper in many applications areas, including housing and infrastructure.

Navneet Damani, a base metal analyst with Anand Rathi, forecasts that zinc will remain stable as the galvanised steel industry, which consumes about 67 per cent of the lustrous metal, is awaiting guidance from the steel industry. In the last one week, Damani says, steel prices have surged almost 10 per cent, indicating high demand from automotive and white goods sectors. But demand from the construction sector, where galvanised steel is used extensively, is yet to pick up. The sentiment in lead is likely to remain bearish.

With contributions from Sunaina Vasudev and Dilip Kumar Jha