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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
METALS WEEKLY A Weekly Report on Metals
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)
METALS WEEKLY A Weekly Report on Metals
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)
Commodity Previous week This week Change % Change
Copper 90924 89961 -963 -1.06%
COMEX WAREHOUSE STOCKS (In tonnes)
Commodity Previous week This week Change % Change
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.
METALS WEEKLY A Weekly Report on Metals
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%
METALS WEEKLY A Weekly Report on Metals
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 $2277 levels which is 61.8% retracement of the above mentioned range. The Momentum Indicator RSI for 14 days is trading at 40.28 levels which are below 560 levels it shows that weakness may continue in Aluminium prices. Traders may use sell at higher levels strategy and may be expect its negative direction and recommended sell at higher levels for the coming week.
METALS WEEKLY A Weekly Report on Metals
CANCELLED WARRANT RATIO ON LME
6500
7000
7500
8000
8500
9000
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
LM
E P
ric
es
($
/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
BASIS CHART (LME 3 MTH FWD–LME CASH PRICES) {$/Tonnes)
-50
-40
-30
-20
-10
0
10
20
30
40
9-J
an
12
-Ja
n
17
-Ja
n
20
-Ja
n
25
-Ja
n
30
-Ja
n
2-F
eb
7-F
eb
10
-Fe
b
15
-Fe
b
20
-Fe
b
23
-Fe
b
28
-Fe
b
2-M
ar
7-M
ar
12
-Ma
r
15
-Ma
r
20
-Ma
r
CopperCONTANGO
BACKWARDATION
CALENDAR SPREAD ON MCX
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
17
-Feb
20
-Feb
23
-Feb
26
-Feb
29
-Feb
3-M
ar
6-M
ar
9-M
ar
12
-Mar
15
-Mar
18
-Mar
21
-Mar
Copper
METALS WEEKLY A Weekly Report on Metals
CANCELLED WARRANT RATIO ON LME
1500
1600
1700
1800
1900
2000
2100
2200
2300
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
LM
E P
ric
es
($
/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
BASIS CHART (LME 3 MTH FWD–LME CASH PRICES) {$/Tonnes)
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
CALENDAR SPREAD ON MCX
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 $2136 levels which is 23.6% of
the above mentioned range. While applying momentum indicator
RSI 14 days on a daily chart, RSI is currently trading at 37.78 which
are below the centre line (50) it shows that prices having still room
for the downside. Going by the above analysis over all trends for
lead prices is still negative short term traders may use sell at
higher levels strategy.
METALS WEEKLY A Weekly Report on Metals
CANCELLED WARRANT RATIO ON LME
15000
16000
17000
18000
19000
20000
21000
22000
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
LM
E P
ric
es
($
/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
BASIS CHART (LME 3 MTH FWD–LME CASH PRICES) {$/Tonnes)
0
20
40
60
80
100
120
9-J
an
12
-Ja
n
17
-Ja
n
20
-Ja
n
25
-Ja
n
30
-Ja
n
2-F
eb
7-F
eb
10
-Fe
b
15
-Fe
b
20
-Fe
b
23
-Fe
b
28
-Fe
b
2-M
ar
7-M
ar
12
-Ma
r
15
-Ma
r
20
-Ma
r
NickelCONTANGO
BACKWARDATION
CALENDAR SPREAD ON MCX
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
25
-Fe
b
28
-Fe
b
2-M
ar
5-M
ar
8-M
ar
11
-Ma
r
14
-Ma
r
17
-Ma
r
20
-Ma
r
23
-Ma
r
Nickel
METALS WEEKLY A Weekly Report on Metals
CANCELLED WARRANT RATIO ON LME
1500
1600
1700
1800
1900
2000
2100
2200
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
LM
E P
ric
es
($
/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
BASIS CHART (LME 3 MTH FWD–LME CASH PRICES) {$/Tonnes)
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
CALENDAR SPREAD ON MCX
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
METALS WEEKLY A Weekly Report on Metals
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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The report contains the opinions of the author, which are not to be construed as investment advice. The author, directors and other employees of Karvy and
its affiliates cannot be held responsible for the accuracy of the information presented herein or for the results of the positions taken based on the opinions
expressed above. The above mentioned opinions are based on the information which is believed to be accurate and no assurance can be given for the accuracy
of this information. There is risk of loss in trading in derivatives. The author, directors and other employees of Karvy and its affiliates cannot be held
responsible for any losses in trading.
METALS WEEKLY A Weekly Report on Metals
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