Metal trade doesn't see silver lining
Increase in supply of base metals like copper, zinc and nickel in the second half of 2007 may ease the supply crunch and soften prices, but traders are unwilling to bet on this.
By Deepa Krishnan, TNN |
MUMBAI: Increase in supply of base metals like copper, zinc and nickel in the second half of 2007 may ease the supply crunch and soften prices, but traders are unwilling to bet on this.
President of Bombay Metal Exchange Rohit Shah said, “Metal prices in India are closely tracking the international prices and are very volatile. Currently business is dull and unless prices fall trade will not improve.” He further said hedge fund money is also driving prices in the international market. Unless these investors book profits, or China cuts imports, demand will keep prices high.
However, the supply may improve significantly by end 2007. According to Ashish Karel, research analyst, Man Financial, “The increase in exploration expenditure since 2003 may result in higher output from the third or fourth quarter of 2007.”
He also pointed out that world production of zinc grew 4% to 10.7 million tonne in 2006. An additional 640,000 tonne of this metal is expected to be produced in 2007, which would mean a 6% rise in total output. Similarly, copper output was reported to have increased by 8% since the beginning of the year.
In spite of this, traders are wary. Surendra Mardia of BME, said, “Currently there is little supply in the Indian market, and demand is high. Copper is at $8,350 levels, and doesn’t look like it would decline soon. The direction of the market is still ambiguous.”
Mape Admisi Commodity Research reports that even as mine output has increased, copper stockpiles in exchange warehouses monitored by the LME had fallen 4.2% to 156,550 tonne. A certain section of analysts are of the view that the demand could also cool in the second half of 2007 mainly on alternative supplies and high interest rate regime in China, the biggest importer so far.
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Copper, nickel, zinc and other base metals have been witnessing a strong rally so far in 2007. Firm energy prices together with massive Chinese demand and low inventories have only fuelled the price rise. Besides, supply disruptions have also contributed to higher metal prices.
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