Base metals were flat to higher as a string of positive macroeconomic figures from China helped reverse days of weakness although traders remained anxious that higher inflation levels could spark further tightening moves in the world’s top metals consumer.
Friday’s economic data showed that China's economy continues to roar at a dizzying pace core inflation accelerated to 5.4% YoY in March, a 32 month high and surpassing market expectations for 5.2% rise. Meanwhile the country’s real GDP growth in the Q1 came in at 9.7% also higher that the forecast. March retail sales, industrial production and fixed asset investment were all at or above expectations on YoY basis.
The news stirred existing fears that Beijing will move to raise interest rates and reserve requirements in order to take some heat out of the economy, potentially forcing stockpiles of copper back onto the market and reducing base metals’ attractiveness as an investment class. China has raised interest rates four times since October. In wider markets the dollar was stable near 16 month lows against the euro on Friday hovering around 1.45 against the common currency, but some analysts expect the dollar to rebound in the near term given the successive sovereign debt downgrades in Europe.
After climbing 6% last week during the annual CESCO conference in Chile, copper has subsequently relinquished most of these gains, tumbling as low as USD 9,350 per tonne.
Broker Fairfax said that this is a seasonally strong period for copper consumption so it will be interesting to see whether Chinese consumption statistics remain strong. Chinese refined output rose by 22% from February, partially stimulated by rising TC and RCs as Japanese smelters reacted to a reduction in capacity from the recent disaster.
Analysts from Goldman Sachs said that we believe that cost push’ support stemming from tightening hydrocarbon markets will likely keep prices elevated in the near term. However, we believe that further upside is likely limited from current levels across metals. As a result, we see less urgency for consumer buying at these levels. We do not believe that nickel or aluminum prices have strong upside potential off today’s levels.
Aluminum traded flat at USD 2,654 up USD 10, while stocks declined for the second day in a row falling by 2,750 to 4,566,425 tonnes. Nickel traded at USD 26,028 per tonne up USD 228 snapping a three day losing streak.
Zinc traded at USD 2,390 per tonne down USD 10 while cancelled warrants rose by 3,425 tonnes to 8,550, due to a big movement in Detroit. But stocks also increased by 525 to 764,250 tonnes the highest since 2004. Demand for zinc will rise 6.3% to 13.4 million tonnes this year due to demand growth in China, India and Peru.
Lead traded at USD 2,615 up USD 2 while stocks rose for the third day in a row, climbing by 3,225 tonnes to 287,075 due to large movements in Malaysia. Tin traded at USD 32,500 per tonne up USD 275.
(Sourced from www.basemetals.com)
