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market | IST

Base metals decline: Key reasons behind it

Mini

The base metal prices have seen some profit-taking. The month of September did not end well and October started with a bit of a decline as well.

The base metal prices have seen some profit-taking. September did not end well and October started with a bit of a decline as well. All of September, it was about the US Fed announcement, the expectation of it, and those tapering announcements that led to some profit-taking, and then China has been continuously trying to rein in the rising commodity prices.
This week, it has been about the weaker economic data that has come in from China whether it was about the PMI numbers for September at 49.6 or the Japan retail sales numbers, factory data that was on the weaker side. And yesterday, September 30, the US jobs data number or the claims data, also rising for the third straight week - that doesn't augur so well for the industrial commodities. There is some pressure because of that as well.
Looking at the month of September, the major declines have come in across the metal sector itself, copper prices declined by 4.5 percent; they are down 2.5 percent for the quarter as well and this is the first quarterly decline that copper has seen after five quarters of gains.
Declines in case of nickel and lead as well, down between 9-11 percent. Iron ore saw the maximum decline in overall metal space, ferrous and non-ferrous, down by nearly 30 percent for September.
Aluminum was the only gainer, up by 6 percent. However, even as the Chinese production for aluminum has declined the downstream consumption also seems to be going down and that would perhaps be on the aluminum prices. There has been a bit of an uptick in the case of aluminum inventories in the last 3-4 sessions and that's showing in prices today. But going forward it is going to be about the Chinese Golden Week holiday from October 1 to 7, so exaggerated moves will be seen in Asia all of next week and that could keep the prices jittery.
However, it is going to be the US non-farm payroll data this evening and that would give an immediate set of direction today itself.
Watch the accompanying video of CNBC-TV18’s Manisha Gupta for more details.