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base metals: Base metals remain volatile on coronavirus concerns

by FxFinanceStockNews

NEW DELHI: Base metal prices saw a slight upward movement on Tuesday , post the news of China’s central bank to inject $174 billion into the market to boost the economy.

In the domestic market, prices of most base metals remained firm on Tuesday, Angel Broking deputy vice president Anuj Gupta said.

On the Multi Commodity Exchange of India (MCX), copper delivery for February on Tuesday was up by 1% to Rs 428.90 per kg, zinc by 1.03% to Rs 172.10 per kg, lead by 0.93% at Rs 146.10 per kg ,nickle by 2.20% to Rs 958.40 per kg and aluminium by 0.66% to Rs 136.65 per kg, said Gupta.

Hitesh Jain, senior analyst – institutional equities, Yes Securities said that with China in midst of an epidemic, tremors have been evident in metal markets. LME metals have rolled back much all the gains they garnered in the aftermath of the US/Chinese Phase 1 trade deal, he said.

However, Jain said that they sense that the anxiety and fear in the financial markets will be a short-lived affair. During similar epidemic in the past (SARS), economic impact was very short-term in nature, with the health-scare induced slowdown not persisting for more than 3-4 months.

While copper mine supply has been under strain for much of 2019, the demand picture pointed to lacklustre conditions, said Jain. “Nevertheless, we expect demand situation to improve in the wake of US-China trade deal. Moreover, low global inventory levels can also offer an element of support to prices. We see LME Copper trading in the range of US $5518-6560 this year and call for an average of $6090 for the year 2020,” he said.

In the past one-month copper prices fell by 4.02 percent to Rs 428 per kg, zinc by 3 percent to Rs 174 per kg and lead by 2.79 percent to Rs 148 per kg. Nickel has under performed with prices seeing a drop of 8.19 percent to Rs 946 per kg, in the past one month.

The trade has been caution even after People’s Bank of China pumping in 1.2 trillion yuan of liquidity into the market, the largest such increase in China since 2004 to stabilize the panicking markets. However, overall the sentiments remained weak owing to the closure of factories and extended holidays in China due the coronavirus threat, said Ajay Kedia, director at Kedia Advisory.

Also, China’s industrial firms posted their first annual decline in profits in four years in 2019, as the slowest economic growth in almost 30 years and a bruising trade war with the United States hit the country’s factories, said Kedia. In the short term copper prices will continue sliding, amid growing fears of the coronavirus outbreak in China, on the cusp of the worst monthly loss, said Kedia adding that concerns still prevail in the market after Goldman Sachs warns that the virus could slow the US economy.

Last week World Health Organization declared the coronavirus in China a public health emergency. Official data released on Monday by China showed industrial profits declining 3.3% on an annual basis to $897.96 billion in 2019, compared with the 2.1% dip in the January-November period, the National Bureau of Statistics (NBS) said on its website. It was first full-year decline since 2015 when profits fell 2.3%, said analysts.

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