Base metals continue rally on buying spree

4 Mar, 2008, 2358 hrs IST,Deepa Krishnan, TNN

MUMBAI: Base metals continued to gain on fund buying euphoria, speculative bull rally and declining warehouse stocks globally.

Copper had gained more than 2.5%, zinc gained almost 5%, nickel soared 8% and tin touched a new high in the previous trading session on London Metal Exchange (LME).

LME three-month copper had marginally fallen after testing $8,661 levels and markets are expected to cross $8,800 levels in the short-term according to MAPE Admisi Commodity Research. LME zinc had tested $2,860 levels last week and could hit $2,900 levels.

In India too on Multi Commodity Exchange (MCX), the copper April futures contract closed up at Rs 345 per kg on Monday from Rs 334 on Saturday. Zinc March contract closed up on Monday at Rs 114 per kg from Rs 109 last Saturday, and nickel moved up to Rs 1,340 per kg from Rs 1,256.

Bombay Metal Exchange (BME) president Surendra Mardia said: “Globally, everybody is entering the commodity markets as equities are not performing. Commodities are seen as a safe haven, and this is pushing the prices to record levels. In

India, all traders are keen to hold on to their positions as they expect prices to move higher. Demand still exists and buying takes place only when absolutely required.”

In absence of any major macro-economic reports, traders would be closely watching currency markets and crude prices for further cues into base metals.

Copper prices in London had gained more than 29% in 2008, while Chinese copper prices have soared almost 23% in last two months. According to analysts, the current rally appears steady.

A Citigroup report said iron ore prices will rise 30% next year because of continued robust demand growth.

According to the report, persisting tight market conditions through 2008 and 2009 will provide the driver for further price increases next year and sustained high prices for the following two years.

The outlook for iron ore demand is more dependent on China than other commodities.

The nation accounts for almost 90% of the growth in demand for the material.

Also, China has become an extremely bullish factor for the tin market, with the country having become a net importer of refined tin since last August.