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Base Metals Daily- 24112011

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					   24 November 2011                                                                                        Base Metals




 FOR PRIVATE CIRCULATION ONLY.                                                                                                   24 November 2011

                                           November 23, 2011
                                 MCX India (Rs/kg)                                 (Most Active)                         Major Currencies
      Commodity       Contract        Open           High      Low       Close    ∆ Close     % chg          Currency     Type        Quote         % Chg
     Aluminium       30-Nov-11        107.70     108.10       105.00     106.10     -2.00     -1.85%       USD Index      Spot          79.050        1.07%
     Copper          30-Nov-11        386.00     386.00       375.80     380.45     -6.15     -1.59%       EUR USD        Spot              1.333    -1.32%
     Nickel          30-Nov-11        922.40     925.40       898.60     904.90    -20.50     -2.22%       USD INR        Spot          52.230       -0.48%
     Lead            30-Nov-11        104.35     104.70       102.75     104.35     -0.80     -0.76%       USD JPY        Spot              77.34     0.49%
                     30-Nov-11        101.40     101.40        99.40     100.70                            GBP USD        Spot              1.551    -0.80%
     Zinc                                                                           -1.00     -0.98%
     Steel           20-Dec-11     31250.00    31530.00     31180.00   31480.00    170.00      0.54%

                                                                                                                         LME Inventories
                             Shanghai (Yuan/MT)                                    (Most Active)
                                                                                                            Commodity                Invenotry        Chng
      Commodity       Contract        Open           High      Low       Close    ∆ Close     % chg
                                                                                                           Aluminium                  4568375         14300
     Copper             Nov-11        56840        56840      55390      55420       -530     -0.95%
                                                                                                           Copper                      397525          450
     Copper            Dec-11         55600        55950      54830      54830       -670     -1.21%
                                                                                                           Lead                        371225         -1425
     Copper             Jan-12        55050        55460      54300      54310       -670     -1.22%
                                                                                                           Nickel                          86286        288
                                                                                                           Zinc                        744700         -1275
                            COMEX (USD cents/lb)                                   (Most Active)
      Commodity       Contract        Open           High      Low       Close    ∆ Close      % chg
     Copper             Nov-11        325.25     325.30       325.25     327.75     -5.30     -1.59%
     Copper            Dec-11         331.00     336.70       323.40     327.90     -5.40     -1.62%
     Copper             Jan-12        331.00     336.70       323.40     328.65     -5.45     -1.63%


                                 LME (USD/tonne)                                   (Most Active)
      Commodity       Contract        Open           High      Low       Close    ∆ Close      % chg
     Aluminium         3 Month      2080.00     2087.00      2003.00    2024.00    -46.50          -2.25
     Copper            3 Month      7402.50     7462.75      7168.00    7240.00    -90.00          -1.23
     Lead              3 Month      2025.00     2030.00      1971.00    2005.00    -14.50          -0.72
     Nickel            3 Month     17660.00    17700.00     17005.00   17025.00   -525.00          -2.99
     Zinc              3 Month      1947.00     1950.25      1885.00    1914.00    -26.00          -1.34

   Highlights
       •      LME Copper trades higher in early trades today after a weaker session yesterday
       •      Asian markets trade mix in early trades today tracking weakness in US equities yesterday
       •      Euro trades higher against dollar in early trades today after closing 1.32% lower yesterday
       •      Dollar Index trades lower in early trades today after rallying more than 1% yesterday
       •      Germany failed to get sufficient bids at a sale of benchmark 10-year government bonds yesterday
       •      US Durable goods data fell by 0.7% in October after declining by -1.5 in previous month
       •      US Initial Jobless Claims rose by 2,000 to 393,000 in the week ended November 19
       •      US Consumer Spending rose at a slower pace of 0.1% in October after 0.7% gain the prior month;
              Consumer Income rose 0.4% after 0.1% in September
       •      US University of Michigan Consumer Sentiment rose to 64.1 in November, the highest since June,
              from 60.9 in October
       •      German Flash Manufacturing PMI fell to 47.9 in November from 49.1 in October; while Services PMI
              rose to 51.4 from 50.6 in October
       •      Euro Zone Flash Manufacturing PMI fell to 46.4 in November from 47.1; while Services PMI rose to
              47.8 from 46.4 in October
       •      Euro Zone Industrial Orders fell by 6.4% in September after gaining 1.4% in August
       •      Focus today on German GDP data

Base Metals                                    Please See Disclaimer on the Last Page                                                                  1
   24 November 2011                                                        Base Metals
    Market Analysis

    LME Copper trades higher in early trades today after a weaker session yesterday. LME Copper yesterday
    hit one month low of $7168 but pared some of its losses to end the session 1.23% lower at $7240 a ton.
    All the other base metals too fell tracking weakness in copper prices.

    Base metals were already under pressure amid weak manufacturing data from China. Later German
    government’s failed bond auction escalated worries over region debt crisis denting market sentiment.
    Further prices fell amid slew of weaker macro economic data from US and Euro Zone.

    Base Metals are trading higher in early trades today after sharp decline yesterday. Supporting prices is
    slight retreat in US Dollar after a positive session yesterday.

    Euro is trading higher against Dollar in early trades today after falling more than 1.3% yesterday. Euro
    however continues to be under pressure amid fears that the contagion is spreading to some of the largest
    economies in the region. Also Dollar Index, dollar strength against six major currencies, is trading lower in
    early trades today after rallying more than 1% yesterday. Dollar continues to seek support from increase
    in safe haven demand due to persistent worries over Euro Zone debt crisis and uncertainly over global
    economy. A weaker dollar makes dollar denominated metals such as copper cheaper for buyers using other
    currencies, thus increasing metals appeal for alternative investment.

    Further supporting prices is strong fundamentals of most of the metals. Copper prices may continue to
    seek support from growing supply constraints and expectation of tighter markets. Declining copper ore
    grades and strikes at some of the largest copper mines have cut supply significantly this year. Ongoing
    strike at Freeport-McMoran's Indonesia and Peru mine are lending support to the prices. Production at the
    mine has ground to a halt due to a strike, forcing its owner to declare partial force majeure. The strike
    already on for two months could last another month, making it the longest mining stoppage in the
    country's history. Freeport is losing production of 2 million pounds of copper and 3,000 ounces of gold
    every day the Grasberg strike continues.

    Also supporting prices is recent drop in stocks at exchange warehouses. Copper stocks at LME warehouses
    rose by 450 tonnes yesterday after declining by 9450 tonnes last week and are the lowest level since Feb
    2011. Also stocks at SHFE fell by 9190 tonnes or 11% last week while those at COMEX fell by 994 tonnes.

    Nickel and Zinc stocks at LME too have been falling supporting prices. Zinc stocks fell by 1275 tonnes
    yesterday after falling by 3725 tonnes last week while those at SHFE fell by 3534 tonnes. Nickel stocks
    rose by 288 tonnes yesterday but are close to their lowest level in three years. In other news, Barclays
    Capital is holding a dominant long position in the London nickel market, contributing to higher nearby
    prices on the back of unseasonal Chinese demand, and this is forcing shorts into expensive covering.

    Lead stocks though at record high levels at LME have been falling recently lending support to the prices.
    Stocks at LME fell by 1425 tonnes yesterday after declining 1900 tonnes last week while those at SHFE fell
    977 tonnes. However rise in Aluminum stocks may weigh on prices. Aluminium stocks at LME rose by
    14300 tonnes yesterday after rising by 26600 tonnes last week while those at SHFE rose by 40430 tonnes
    or 29%.

    The upside may however be capped as macro economic picture continues to look weak. Putting pressure
    on prices is escalating worries over Euro Zone debt crisis, weak macro economic data from US and slowing
    manufacturing growth in China.

    In Euro Zone concerns over debt crisis escalated after Germany worst bond sales since the launch of euro
    sparked fears the debt crisis was starting to threaten even Berlin. The nation failed to find buyers for 35%
    of its benchmark 10-year government bonds to reach its maximum sales target of 6 billion euros. Further
    weaker Manufacturing data from the region too signaled deteriorating pace of growth in the region.

    In US too most of the data releases yesterday were weaker than expected fuelling fears over slowing pace

Base Metals                       Please See Disclaimer on the Last Page                                       2
   24 November 2011                                                       Base Metals
    of recovery in the region. Jobless claims rose by 2000 to 393,000 while durable goods fell by 0.7% in
    October. Consumer Spending too slowed to 0.1% as against 0.7% in September.

    Further weighing on prices is concerns over faltering demand in China after slowing manufacturing growth in
    China. China’s HSBC Manufacturing PMI fell to 48 in November from earlier reading of 51.

    Prices may further come under pressure amid choppiness in equities. Asian markets are trading mix today
    tracking weakness in US equities yesterday. In US, Dow Jones Industrial Average tanked 236.17 points to
    close 2.05% lower at 11257.55 while S&P plummeted 26.25 points to end 2.21% lower at 1161.79.

    Prices will further track economic releases and its impact on global equity and currency markets. As for
    today, focus will be on German GDP data.

    Outlook

    Copper- MCX Copper may note some gains tracking international exchanges, however the upside may be
    capped. LME copper trades higher in early trades today after falling to one month low yesterday. Supporting
    prices is slight retreat in US Dollar and strong fundamentals. Copper is supported by ongoing strike at worlds
    second largest copper mine and falling stocks at exchange warehouses. Stocks at LME rose by 450 tonnes
    yesterday after declining by 9450 tonnes last week while those at SHFE fell by 9190 tonnes. The gains may
    however be capped amid gloomy global outlook. Prices continue to be under pressure amid escalating
    worries over Euro Zone debt crisis, weak manufacturing growth in China and choppiness in global equities.
    Prices will further track economic releases and its impact on global equity and currency markets. As for
    today, focus will be on German GDP data. Support for November copper is seen at Rs.375 while Resistance
    is seen at Rs.387.

    Aluminum- MCX Aluminum may note some gains tracking copper prices. However capping the gains is recent
    gain in stocks at LME and SHFE warehouses. Stocks at LME rose by 14300 tonnes yesterday after gaining by
    26600 tonnes last week while those at SHFE rose by 40430 tonnes or 29%. Support for Aluminum November
    contract is seen at Rs.104.5 while resistance of Rs.107.5.

    Zinc- MCX Zinc may note some gains tracking copper prices. Also falling stocks at LME warehouses may lend
    support to the prices. Stocks fell by 1275 tonnes yesterday after declining by 3725 tonnes last week while
    those at SHFE fell by 3534 tonnes. The gains may however be capped amid growing surplus in the market.
    According to the Lisbon-based International Lead and Zinc Study Group (ILZSG), the global zinc market was
    in surplus by 275,000 tonnes in the first nine months of 2011. Support for MCX Zinc November contract is
    seen at Rs.97.5 while Resistance is seen at Rs.101.5.

    Nickel- MCX Nickel may note some gains tracking international market, however the upside remains capped.
    Supporting prices is rebound in copper prices, slight retreat in US Dollar and falling stocks. Stocks rose by
    288 tonnes yesterday but continue to be at lower levels for the year. Also according to the latest monthly
    bulletin from International Nickel Study Group (INSG) the global nickel market was in supply deficit by 6,300
    tonnes in the first nine months of 2011. The upside may however be capped as concerns over bleak global
    outlook persist. Support for MCX Nickel November contract is seen at Rs.880 while Resistance is seen at
    Rs.930.

    Lead- MCX Lead may note some gains tracking copper prices. Also supporting prices is recent drop in stocks
    at exchange warehouses. Stocks at LME fell by 1425 tones yesterday after declining by 1900 tonnes last
    week while those at SHFE fell by modest 977 tonnes. The upside may however be capped amid growing
    surplus in the market. According to the Lisbon-based International Lead and Zinc Study Group (ILZSG), the
    global lead market was in surplus by 170,000 tonnes in the first nine months of 2011. Support for MCX Lead
    November contract is seen at Rs.102 while Resistance is seen at Rs.105.5.

     Steel- NCDEX Steel may trade with a positive bias amid mix global cues but lack of demand in domestic
     markets may cap the upside. Support for NCDEX Steel December contract is seen at Rs.31200 while
     Resistance is seen at Rs.31800.
Base Metals                       Please See Disclaimer on the Last Page                              3
   24 November 2011                                                              Base Metals

      Price Movement on LME last week


                                       LME 3 month Contract (USD/ Tonne)
               Commodity       Open          High         Low          Close           PCP            Change   % Change
        Aluminium              2175          2197         2080         2110            2162             -52     -2.41%
        Copper                 7740          7933         7380         7525            7639             -114    -1.49%
        Nickel                 18252         18550        17490        17655           18075            -420    -2.32%
        Lead                   2020          2066         1980         2059            1995             64      3.21%
        Zinc                   1935          1980         1880         1965            1920             45      2.34%




      Stocks movement on Exchange Warehouses


                           LME Stocks (tonnes)       18-Nov       11-Nov       Change            %
                                Aluminum             4560275      4533675      26600           0.59
                                 Copper              398250       407700       -9450           -2.32
                                  Lead               374950       376850       -1900           -0.50
                                  Nickel              84750        84180        570            0.68
                                   Zinc              749000       752725       -3725           -0.49




                           SHFE Stocks (tonnes)      18-Nov       11-Nov       Change            %
                                Aluminum             179443       139013       40430           29.08
                                 Copper               74199        83389       -9190           -11.02
                                  Lead                49016        52550       -3534           -6.73
                                   Zinc              365526       366503        -977           -0.27




                              COMEX Stocks           18-Nov       11-Nov       Change            %
                                 Copper               86649        87643        -994           -1.13


      CFTC Data

                                                                  The CFTC report as on November 15, 2011
                                                                  showed an increase of 5.19% in total OI,
                                                                  compared to November 8 levels. Net long
                                                                  commercial positions rose by 10.04% while
                                                                  commercial net short positions rose by 8.59%.
                                                                  Non-commercial long positions increased by
                                                                  1.1% and net short non-commercial positions

      rose by 6.52%. Net Non Commercial positions reversed to shorts from net long of 312 to net short of
      1114, as concerns over Euro Zone crisis dent market sentiments.




Base Metals                        Please See Disclaimer on the Last Page                                                 4
   24 November 2011                                                                                                           Base Metals


                    Faiyaz Hudani                                                                           Dharmesh Bhatia
                    Sr. Research Analyst- Spices, Edible Oil                                                Associate Vice-President- Technical Research
                    faiyaz.hudani@kotakcommodities.com                                                      dharmesh.bhatia@kotakcommodities.com
                    +91-22-66528837                                                                         +91-22-66528846




                    Sudha R. Acharya                                                                        Amit Sajeja
                    Research analyst- Edible Oil, Pulses                                                    Sr. Research Analyst- Technical Analyst
                    sudha.acharya@kotakcommodities.com                                                      amit.sajeja@kotakcommodities.com
                    +91-22-66528809                                                                         +91-22-66528847




                    Madhavi Mehta                                                                           Ajay Baheti
                    Research analyst- Energy, Bullion                                                       Associate Research- Technical Analyst
                    madhavi.mehta@kotakcommodities.com                                                      ajay.baheti@kotakcommodities.com
                    +91-22-66528809                                                                         +91-22-66528845




                    Priyanka Jhaveri
                    Research analyst- Base Metals
                    priyanka.jhaveri@kotakcommodities.com
                    +91-22-66528848




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