Copper is set to drive the prices of base metals this week, albeit for a short period, on the back of an anticipated economic booster by the US at the Federal Open Market Committee (FOMC) meeting on September 20-21. Last week, base metals remained almost flat.
Commonly, economic stimulus to the system helps spending in sectors such as infrastructure, housing and consumer durables, where most of the global copper output is used. Hence, financial support to the system helps rise demand of copper both directly and indirectly.
“As a knee jerk reaction, copper will drive base metals. But, the quantum of jump will depend on the steps taken by the US for bailing out the country’s economy to prevent another recession,” said Naveen Mathur, associate director, Angel Broking.
| MOVEMENT IN BASE METALS ($/tonne) | |||
| Metals | Sept 9 | Sept 16 | Change (%) |
| Aluminium | 2,343 | 2,346 | 0.13 |
| Copper | 8,904 | 8,781 | -1.38 |
| Nickel | 21,480 | 21,705 | 1.05 |
| Tin | 24,095 | 23,525 | -2.37 |
| Zinc | 2,185 | 2,188 | 0.14 |
| Lead | 2,455 | 2,426 | -1.18 |
| Source:LME | |||
However, QE2 stimulus of $600 billion by the US central bank, which ended in June 2011, only helped raise prices of overall base metals but, not has not helped the overall global economy. Hence, economists raise doubts about the possibility of a third economic booster. “We do not see that the US government will pump in fresh money to the economy. But, we are convinced that the government will take some action to keep the sentiment afloat,” Mathur added.
Meanwhile, overseas base metals producers have started focusing on Asian countries, led by India and China, for growth primarily because of the bullish prospects of the overall economic growth in the region. Nearly 500 leading global base metals equipment manufacturers, technology suppliers and players belonging to various allied industries are set to congregate in Bangalore at MetEx India 2011. The international exhibition on metal and metallurgical equipment, technologies and supplies will be held between September 22 and 24.
The event is organised jointly by Indian Institute of Metals – an apex professional body of metallurgists and technocrats with about 10,000 institutional and individual members across the country – and Koelnmesse YA Tradefair, an Indian subsidiary of the world’s leading tradefair organiser Koelnmesse GmbH, Germany.
MetEx India has group participation from China, a dedicated pavilion of American Society of Materials (ASM) International – Bangalore Chapter and participation from Austria, France, Germany, Japan, the UK and US.
According to an analyst, massive state investments in infrastructure across South Asia in economic zones, industrial estates, road and rail links, airports and seaports, are proving to be a boon for the metals and allied sectors. Even in the automobile sector, India has emerged as the favoured investment destination on account of its strong economic fundamentals.
“India’s investment on infrastructure will continue. Hence, we do not see any major downside risk in copper. Prices are unlikely to decline below $8,500 a tonne in the near future, with an upside bias of $10,000 a tonne,” said Surendra Mardia, director of Bombay Metal Exchange (BME).
Central banks of European countries have joined hands to provide economic support to Greece. The European Central Bank (ECB) and international policy makers coordinated to lend dollars to banks to help tame the credit crisis, boosting demand prospects for industrial metals.
The ECB coordinated with the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank to extend three-month loans to euro-area banks to ensure they have enough cash for the rest of the year. The leaders of France and Germany agreed upon to support Greece’s continued participation in the euro currency.
