A Weekly Report on Metals · MCX Aluminium Mar Fwd 12 ... 03/29/2012 14:30 EC Euro-zone Services...

METALS WEEKLY A Weekly Report on Metals

OUTLOOK

Base metal prices retreated for the week gone by due to declining PMI manufacturing numbers from Euro-zone and China coupled with weak new home sales figures from US. Lead was the top loser and prices declined 5.75 percent as demand for battery and radiation shielding remained fragile. Even the global equities market contracted along with increased inventories, supporting bearish trend among metals pack.

In the coming week, base metal prices may continue to closely follow the economic developments after declining mostly for the week. The Asian developments are slightly favorable from Japan and Indonesia for price gain among base metals. Japan has provided much of the easing supporting demand and Indonesia has banned exports of metal-ores to promote domestic smelting and refining. Indonesia is the largest exporter of bauxite and Nickel ore to China and with mining ban imposed before 2014, the Chinese refiners now need to arrange alternate source of raw-materials and this may result in shooting refined metal prices in the medium term due to higher raw-material costs. Presently demand from China has remained subdued due to higher energy prices and stricter credit policy and even at lower metal prices Chinese buyers are reluctant to accumulate metals and may continue the bearish trend in the coming week too. From the Euro-zone, the markets may closely follow the spring meet of IMF along with Economic affairs meet with the troika. We may expect the crisis fund of ESM and EFSF to also increase from 500 to 692 billion Euros supporting gains to the single currency and may also extend slight gains to metals pack at the end of the week. The German inflation along with retail sales are expected to be slight positive and may support gains, however, the economic releases in the form of IFO and Euro-zone confidence are expected to decline after weak PMI releases and may contribute price fall in metals. The US durable goods along with personal spending and income is expected to increase and may provide slight respite to the dwindling metals pack, but the housing sector and labor sector may continue to support downside after increase in mortgage rate from 3.57 to 4.08 percent. Even Dallas fed manufacturing and Chicago purchasing managers index is also expected to decline and may result in weak price performance of metals. Overall, concerns of weak manufacturing and industrial activity coupled with mixed economic releases from Euro-zone and US may continue to support down side in the coming week as producers are still uncertain regarding future demand.

TECHNICAL RECOMMENDATIONS*

Commodity Series S3 S2 S1 CLOSE R1 R2 R3 Recommendations

LMEAluminiu

mm

Fwd 1993 2072 2123 2174 2253 2332 2383 Sell at 2205-2220 TP 2150/2080 SL 2280

MCX

Aluminium

Mar

12

-12

105.1 107.2 108.6 109.9 112.0 114.1 115.5 Sell at 103.8-104.1 TP 99.1 SL 106.3

LME Copper Fwd 7874 8068 8224 8380 8575 8769 8925 Trading Range : 8130-8675

MCX Copper Apr-

12111 420.3 424.2 428.1 432.1 435.9 439.8 443.7 Trading Range : 421.2-439.6

LME Lead Fwd 1790 1885 1940 1995 2090 2184 2239 Sell at 2020-2040 TP 1920/1825 SL 2130

MCX Lead Mar -

12 96.5 99.1 100.9 102.7 105.4 108.0 109.8 Sell at 106.30-106.60 TP 103.10 SL 108.40

LME Nickel Fwd 1689

0

1751

7

1784

6

18175 1880

2

1942

9

19758 Sell at 18620-650 TP 17885/17330 SL

1910019970 MCX Nickel Mar -

12 894.0 913.5 924.0 934.5 954.0 973.5 984.0 Sell at 945-948 TP 925/908 SL 964

LME Zinc Fwd 1848 1913 1959 2005 2070 2135 2181 Sell at 2030-2040 TP 1912 SL 2110

MCX Zinc Mar -

12 98.0 99.7 100.9 102.2 103.8 105.5 106.7 Sell at 102.9-103.2 TP 101.3/100.1 SL 104.3

Steel NCDEX Mar-

1212 3147

7

3257

3

3319

7

33820 3491

7

3601

3

36637 Trading Range: 33940 - 34950

*NOTE: The calls shown above are purely WEEKLY Recommendations

Key Economic Events this Week Date Time Region Event Period Survey Prior

03/26/2012 19:30 US Pending Home Sales MoM FEB 1.00% 2.00%

03/27/2012 18:30 US S&P/CaseShiller Home Price Ind JAN 135.8 136.71

03/27/2012 19:30 US Richmond Fed Manufact. Index MAR 18 20

03/28/2012 16:30 US MBA Mortgage Applications 23-Mar - - -7.40%

03/29/2012 14:30 EC Euro-zone Services Confidence MAR -0.8 -0.9

03/29/2012 18:00 US GDP QoQ (Annualized) 4Q T 3.00% 3.00%

For all the data releases; click here

March 24, 2012


PERFORMANCE SNAPSHOT

Exchange Commodity Open High Low Close

Close

% Change Volume

Volume %

Change

Open

Interest

OI

% Change

Aluminium 2260 2281 2151 2174 -3.72 188,851 46.13 6,724 27.71

Copper 8530.25 8613 8262.5 8380 -1.53 269,700 27.32 2,830 -32.12

Lead 2109.5 2129 1979.25 1995 -5.36 98,374 49.40 2,083 27.17

Nickel 19050 19100 18144 18175 -3.84 38,347 18.56 1,010 34.49

Zinc 2081 2089 1978 2005 -3.51 134,425 6.07 3,033 -18.53

Aluminium 112.1 112.8 109.35 109.9 -2.01 40,809 21.97 2,739 21.95

Copper 432 435.8 428 432.1 -0.02 589,793 -2.83 36,003 -15.89

Lead 105.45 106.2 101.75 102.7 -2.75 132,874 51.94 10,584 63.69

Nickel 956.9 963 933 934.5 -2.25 227,556 -1.00 30,650 24.41

Zinc 103.5 104.2 101.3 102.2 -1.49 91,461 -0.55 4,631 -5.12

LME 3-mth

Forward

(USD/tonne)

MCX Futures

( /̀Kg)

MARKET OVERVIEW

Base metal prices continued to retreat and came down by 1.5 to 5.3 percent at LME as global manufacturing

and industrial activity declined resulting in poor demand for metals pack

At MCX, loses were restricted and prices came down by 0.02 to 2.75 percent due to Indian rupee depreciation and

the same lost 2.04 percent against the Greenback

Lead was the top loser and prices came down by 5.36 percent at LME and by 2.75 percent at MCX supported by weak

cancelled warrants and rising inventories

Trade participation has improved compared to last week at LME as volumes and open interest has increased

considerably, the present trend indicates that traders are presently preferring short positions as global

manufacturing continues to pose a concern

SHANGHAI MARKET PERFORMANCE

Commodity Previous Week This Week Change % ChangeCopper 59420 60340 920 1.55%

Zinc 15555 15775 220 1.41%

Aluminum 15965 16040 75 0.47%

PRICES (CNY/MT)

COMEX MARKET PERFORMANCE

Commodity Previous Week This Week Change % Change

Copper 385.25 387.4 2.15 0.56%

PRICES (USD/LB)


Commodity Futures Trading Commission (CFTC) Report- Copper

Non-Commercial 3/13/2012 3/20/2012 Change % Change

Long 43424 48835 5411 12.46%

Short 34352 36560 2208 6.43%

Spreading 18188 19261 1073 5.90%

Commercial

Long 75104 72827 -2277 -3.03%

Short 82186 81578 -608 -0.74%

Total

Long 136716 140923 4207 3.08%

Short 134726 137399 2673 1.98%

CFTC Report - Copper (In contracts)

INVENTORY DETAILS

Commodity Previous week This week Change % Change

Copper 263825 255175 -8650 -3.28%

Zinc 872400 889975 17575 2.01%

Aluminium 5071950 5089250 17300 0.34%

Lead 366875 372875 6000 1.64%

Nickel 97422 97740 318 0.33%

LME WAREHOUSE STOCKS (In tonnes)


Copper 90924 89961 -963 -1.06%

COMEX WAREHOUSE STOCKS (In tonnes)


Copper 224781 227276 2495 1.11%

Zinc 386836 387381 545 0.14%

Aluminium 361088 363945 2857 0.79%

SHANGHAI WAREHOUSE STOCKS (In tonnes)

The data released by CFTC on last Thursday

tells us that market is occupied with more

weights of buyers when compared to sellers;

the non-commercial buyers are

comparatively more compared to sellers as

traders might be opting for longs after prices

came down drastically. In the coming week,

metals might resume the Bull Run; however

weak demand from commercial buyers and

weak corporate procurement may continue

to restrict gains.


ECONOMIC REVIEW

Last week, financial markets witnessed contraction in global PMI manufacturing numbers resulting in fall in

commodity prices. Consumer confidence continued to improve more than expectation but economic activity stalled

in Euro-zone and China extending loses to financial markets. Presently, the two periphery of the World, US and

Japan have showed signs of improvement sparking economic activity and favored to restrict downside. However

the mainland has lagged in terms of sustaining developments due to in-house constrains pulling down commodity

prices.

The Week gone by, we saw the UK budget where the government reduced tax from 50 percent to 45 percent for

elite citizens and also controlled deficit in order to avoid down gradation from Moody’s investor service. From the

Euro-zone, German PPI along with industrial new orders continued to shrink indicating weak economic activity

after much of austerities. The US housing sector posted increased building permits, however the new home sales

and housing starts declined along with MBA mortgage applications. All these developments weakened the equities

and the markets retreated slightly more than a percent. The Dollar index also depreciated by 0.55 percent, while

the Euro gained 0.72 percent against the greenback. At our domestic market the Nifty gained 5.36 percent after the

Union budget while the INR depreciated by 2.04 percent restricting loses at our domestic commodities market.

(Courtesy: KCTL’s Weekly Economic report)

Currency Last Week This Week % ChangeDollar Index 79.786 79.345 -0.55%

EUR/USD 1.3175 1.327 0.72%

GBP/USD 1.5844 1.5869 0.16%

USD/INR 50.1912 51.2175 2.04%

Bond Yields Last Week This Week Change (in bps)US 10 year bond 2.294 2.2317 -6.2

German 10 year bond 2.05 1.865 -18.5

India 10 year bond 8.422 8.389 -3.3

Equity Indices Last Week This Week % Change

Dow Jones Ind. Avg. 13232.62 13080.73 -1.15%

S&P 500 Index 1404.17 1397.11 -0.50%

FTSE 100 Index 5965.58 5854.89 -1.86%

Nikkei 225 10129.83 10011.47 -1.17%

Shanghai Composite 2439.46 2404.74 -1.42%

Nifty 4905.80 5168.85 5.36%


CANCELLED WARRANT RATIO ON LME

2000

2050

2100

2150

2200

2250

2300

2350

2.50%

7.50%

12.50%

17.50%

22.50%

27.50%

32.50%

37.50%

LM

E P

ric

es

($

/M

T)

Ca

nc

ell

ed

Ra

tio

Aluminium (Prices Vs Cancelled Ratio)

ALUMINIUM

Activities at spot market have ramped as

Shanghai metal inventories witness

drawdown but Norsk hydro has forecasted

weak price performance in medium term

Fundamentally the inventories have continued

to witnessed slightly drawdown at LME, and

at Shanghai warehouses, but demand may

contract due to slowdown in manufacturing

and building activities

BASIS CHART (LME 3 MTH FWD–LME CASH PRICES) {$/Tonnes)

0

5

10

15

20

25

30

35

40

45

50

9-J

an

12

-Ja

n

17

-Ja

n

20

-Ja

n

25

-Ja

n

30

-Ja

n

2-F

eb

7-F

eb

10

-Fe

b

15

-Fe

b

20

-Fe

b

23

-Fe

b

28

-Fe

b

2-M

ar

7-M

ar

12

-Ma

r

15

-Ma

r

20

-Ma

r

AluminiumCONTANGO

BACKWARDATION

CALENDAR SPREAD ON MCX

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

28

-Feb

2-M

ar

5-M

ar

8-M

ar

11

-Mar

14

-Mar

17

-Mar

20

-Mar

23

-Mar

Aluminium

LME Aluminium future prices last week closed lower than the previous week down by more than 3.00% on LME, prices have made a high of made a high of $2281 against the low of $2174 and finally settled lower at $2174 levels. Last week we have seen prices have broken the trend line support which was around $2240 levels and after that prices have fallen sharply and test the levels of $2174. For the coming week we may expect prices may fall further, while applying Fibonacci retracement on a daily chart Aluminium prices may test $2150 levels which is 38.2% retracement levels if breaches this levels and sustain below the same levels prices may fall further and test the levels of $2080 levels which is 23.6% retracement of the range of $2476-$1955 levels. While prices have resistance of $2215 levels which is 50.00% retracement if break this levels next resistance seen at $2277 levels which is 61.8% retracement of the above mentioned range. The Momentum Indicator RSI for 14 days is trading at 40.28 levels which are below 560 levels it shows that weakness may continue in Aluminium prices. Traders may use sell at higher levels strategy and may be expect its negative direction and recommended sell at higher levels for the coming week.



6500

7000

7500

8000

8500

9000

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

LM

E P

ric

es

($

/M

T)

Ca

nc

ell

ed

Ra

tio

Copper (Prices Vs Cancelled Ratio)

COPPER

The PASAR smelter [Columbia]

shutdown has led to an improvement in

the availability of concentrate, in Europe

and is expected to last until mid-2012. In

addition, the unfavorable exchange

ratio between SHFE/LME makes imports

unattractive to Chinese purchasers

The market is presently under

backwardation as future demand has

declined due to weak manufacturing. In the

coming week prices are mostly expected to

remain sideways


-50

-40

-30

-20

-10

0

10

20

30

40

9-J

an

12

-Ja

n

17

-Ja

n

20

-Ja

n

25

-Ja

n

30

-Ja

n

2-F

eb

7-F

eb

10

-Fe

b

15

-Fe

b

20

-Fe

b

23

-Fe

b

28

-Fe

b

2-M

ar

7-M

ar

12

-Ma

r

15

-Ma

r

20

-Ma

r

CopperCONTANGO

BACKWARDATION


0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

17

-Feb

20

-Feb

23

-Feb

26

-Feb

29

-Feb

3-M

ar

6-M

ar

9-M

ar

12

-Mar

15

-Mar

18

-Mar

21

-Mar

Copper



1500

1600

1700

1800

1900

2000

2100

2200

2300

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

LM

E P

ric

es

($

/M

T)

Ca

nc

ell

ed

Ra

tio

Lead (Prices Vs Cancelled Ratio)

LEAD According to ILZSG Lead market

remained under surplus as mine supply increased by 33 percent while global demand only gained 5.5 percent compared to last year and may have slight negative impact on prices

In the coming week, prices are expected to remain weak as inventories continued to increase and warrants were also reduced supported by weak volumes and open interest, slight recovery might be witnessed due to positive economic expectations coupled with Chinese buying


0

5

10

15

20

25

30

35

40

6-J

an

11

-Ja

n

16

-Ja

n

19

-Ja

n

24

-Ja

n

27

-Ja

n

1-F

eb

6-F

eb

9-F

eb

14

-Fe

b

17

-Fe

b

22

-Fe

b

27

-Fe

b

1-M

ar

6-M

ar

9-M

ar

14

-Ma

r

19

-Ma

r

22

-Ma

r

LeadCONTANGO

BACKWARDATION


0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

18

-Fe

b

21

-Fe

b

24

-Fe

b

27

-Fe

b

1-M

ar

4-M

ar

7-M

ar

10

-Ma

r

13

-Ma

r

16

-Ma

r

19

-Ma

r

22

-Ma

r

Lead

Last week LME lead prices have fallen more than 5.20% on a

weekly basis prices have made a high of $2129 against the low of

$1979 and finally prices have settled at lower at $1995 levels. On a

weekly chart lead prices have broken the trend line channels on

the lower side, while looking at daily chart prices have also broken

the trend line support which was around $2065 levels after that we

have seen sharp fall in lead prices. While applying Fibonacci

extensions on price chart we expect price may fall further and test

he levels of $1920 which is 50.00% extension if beaches this levels

and sustain below the same levels prices may fall further and touch

$1823 levels which is 61.8% of the range of $2589.5-$1772.25-

$2329. While on the upper side lead prices have major resistance

of trend line which is around $2065 if prices will breaks these

levels than next resistance seen at $2136 levels which is 23.6% of

the above mentioned range. While applying momentum indicator

RSI 14 days on a daily chart, RSI is currently trading at 37.78 which

are below the centre line (50) it shows that prices having still room

for the downside. Going by the above analysis over all trends for

lead prices is still negative short term traders may use sell at

higher levels strategy.



15000

16000

17000

18000

19000

20000

21000

22000

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

LM

E P

ric

es

($

/M

T)

Ca

nc

ell

ed

Ra

tio

Nickel (Prices Vs Cancelled Ratio)

NICKEL

Indonesia has banned export of Nickel ores to China may have slight bullish impact in medium term

Increased production and similar demand

may continue to weigh on Nickel prices for

short term perspective and we expect prices

to remain weak due to lower steel

performance and demand


0

20

40

60

80

100

120

9-J

an

12

-Ja

n

17

-Ja

n

20

-Ja

n

25

-Ja

n

30

-Ja

n

2-F

eb

7-F

eb

10

-Fe

b

15

-Fe

b

20

-Fe

b

23

-Fe

b

28

-Fe

b

2-M

ar

7-M

ar

12

-Ma

r

15

-Ma

r

20

-Ma

r

NickelCONTANGO

BACKWARDATION


0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

25

-Fe

b

28

-Fe

b

2-M

ar

5-M

ar

8-M

ar

11

-Ma

r

14

-Ma

r

17

-Ma

r

20

-Ma

r

23

-Ma

r

Nickel



1500

1600

1700

1800

1900

2000

2100

2200

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

LM

E P

ric

es

($

/M

T)

Ca

nc

ell

ed

Ra

tio

Zinc (Prices Vs Cancelled Ratio)

ZINC

Zinc market continued to witness lower

demand and contango also came down

drastically

Fundamentally Zinc warrants have declined

slightly after remaining mostly weak and

the prices traded at premium compared to

lead. In this weak Zinc may fall

comparatively more than lead as demand

continues to decline with lower housing and

industrial activity


0

5

10

15

20

25

30

9-J

an

12

-Ja

n

17

-Ja

n

20

-Ja

n

25

-Ja

n

30

-Ja

n

2-F

eb

7-F

eb

10

-Fe

b

15

-Fe

b

20

-Fe

b

23

-Fe

b

28

-Fe

b

2-M

ar

7-M

ar

12

-Ma

r

15

-Ma

r

20

-Ma

r

ZincCONTANGO

BACKWARDATION


0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

25

-Fe

b

28

-Fe

b

2-M

ar

5-M

ar

8-M

ar

11

-Ma

r

14

-Ma

r

17

-Ma

r

20

-Ma

r

23

-Ma

r

Zinc


DATA RELEASES SCHEDULED FOR THE WEEK AHEAD

Date Time Region Event Period Survey Prior

03/26/2012 13:30 GE IFO - Business Climate MAR 109.6 109.6

03/26/2012 13:30 GE IFO - Current Assessment MAR 117 117.5

03/26/2012 13:30 GE IFO - Expectations MAR 102.6 102.3

03/26/2012 18:00 US Chicago Fed Nat Activity Index FEB - - 0.22

03/26/2012 19:30 US Pending Home Sales MoM FEB 1.00% 2.00%

03/26/2012 20:00 US Dallas Fed Manf. Activity MAR 16 17.8

03/27/2012 11:30 GE Import Price Index (MoM) FEB 0.90% 1.30%

03/27/2012 18:30 US S&P/CaseShiller Home Price Ind JAN 135.8 136.71

03/27/2012 19:30 US Consumer Confidence MAR 70 70.8

03/27/2012 19:30 US Richmond Fed Manufact. Index MAR 18 20

03/28/2012 16:30 US MBA Mortgage Applications 23-Mar - - -7.40%

03/28/2012 17:30 GE Consumer Price Index (MoM) MAR P 0.30% 0.70%

03/28/2012 18:00 US Durable Goods Orders FEB 3.00% -4.00%

03/29/2012 14:30 EC Business Climate Indicator MAR -0.16 -0.18

03/29/2012 14:30 EC Euro-Zone Consumer Confidence MAR F -19 -19

03/29/2012 14:30 EC Euro-Zone Economic Confidence MAR 94.5 94.4

03/29/2012 14:30 EC Euro-Zone Indust. Confidence MAR -5.8 -5.8

03/29/2012 14:30 EC Euro-zone Services Confidence MAR -0.8 -0.9

03/29/2012 18:00 US GDP QoQ (Annualized) 4Q T 3.00% 3.00%

03/29/2012 18:00 US Personal Consumption 4Q T 2.10% 2.10%

03/29/2012 18:00 US GDP Price Index 4Q T 0.90% 0.90%

03/29/2012 18:00 US Initial Jobless Claims 24-Mar 350K 348K

03/29/2012 18:00 US Continuing Claims 17-Mar 3350K 3352K

03/30/2012 05:20 JN Industrial Production (MoM) FEB P 1.30% 1.90%

03/30/2012 11:30 GE Retail Sales (MoM) FEB 1.10% -1.60%

03/30/2012 18:00 US Personal Income FEB 0.40% 0.30%

03/30/2012 18:00 US Personal Spending FEB 0.60% 0.20%

03/30/2012 19:15 US Chicago Purchasing Manager MAR 63 64

03/30/2012 19:25 US U. of Michigan Confidence MAR F 74.7 74.3

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A Weekly Report on Metals · MCX Aluminium Mar Fwd 12 ... 03/29/2012 14:30 EC Euro-zone Services...

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Transcript of A Weekly Report on Metals · MCX Aluminium Mar Fwd 12 ... 03/29/2012 14:30 EC Euro-zone Services...