Posts Tagged ‘SHFE’

ALUMINIUM… “PRICES ON ONE-WAY TRACK”

Aluminium is a silvery white and dull gray coloured, and the third most abundant element in the Earth’s crust after oxygen and silicon. In nature, it only exists in very stable combinations. Due to its strong affinity to oxygen, it is always found in the form of oxides or silicates. The chief source of aluminium is bauxite ore. Aluminum is lightweight, ductile and soft. Its density is only 1/3 of steel. Aluminum is resistant to weather, common atmospheric gases and a wide range of liquids.

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Global Scenario

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Aluminium ore, bauxite, occurs mainly in tropical and sub-tropical areas – Africa, West Indies, South America and Australia. The leading producing countries are United States, Russia, Canada, the European Union, China, Australia, Brazil, Norway, South Africa, Venezuela, the Gulf States (Bahrain and United Arab Emirates), India and New Zealand. Together they constitute more than 90 percent of the world primary aluminium production. The largest aluminium markets are North America, Europe and East Asia.

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Indian Scenario

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India is the fifth largest producer of aluminium in the world with production capacity of about 3 per cent of the world. India’s reserves are estimated to be 7.5 per cent of the total deposits. India is self dependent for aluminium supply and exports about 82,000 tonnes annually. The primary Indian aluminium producers were BALCO, NALCO, HINDALCO and MALCO.

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India’s per capita consumption of aluminium is 1 kg as against 30 kg in the developed world.

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World Aluminium Markets

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LME, TOCOM, SHFE and NYMEX are the important international markets that provide direction to the aluminium prices.In 2009, aluminium prices gained about 40% with the global combination of stimulus packages and the rapid recovery in demand in emerging markets. The prices and inventory level of metal in international market, such as LME and SHFE, influences the domestic market.

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Facts & Figures

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·World aluminum output in March rose 13% on the month to 2.045 million metric tonnes, according to figures released by the International Aluminum Institute.

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·Primary aluminium stocks in China, the world’s top consumer and producer of the metal, have risen more than 45 percent from January on increased production.

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·Brazil’s output of primary aluminum dropped 0.9% on the year in March to 131,700 metric tons.

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·Global demand rose by 29% in January and February compared with the very depressed levels recorded a year ago.

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Price Movement

Despite the poor news stemming from Euro weakness on Greek debt woes and monetary tightening in China, aluminium halted its downturn and traded sideways for most of last week.

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Most other base metals also traded sideways to higher last week, and aluminium continues to be strongly correlated with copper. Swollen inventories are no longer a problem for the aluminium market, as global demand is helping to push up alumininum prices (arrow line).

Weekly Update 5th-9th April

Domestic markets continued to build on the gains for the eighth consecutive week. The undertone remained buoyant as the growth signs are becoming clearer. A closer look on the gains gives impression that emerging economies would continue as a favorite investment destination. Hopes of good result season, continued buying by foreign institutional investors & recent upgrade of India’s credit rating are some of the factors that are keeping up the investment momentum in the market. On the global front, in US the recent payroll data has further boosted the confidence among the investors as it looks the deepest recession has ended.

Payrolls, a major indicator rose by 162,000 workers, the third gain in the past five months and the most since March 2007. Home prices in US unexpectedly rose in January for an eighth month. Home prices in 20 US cities rose 0.3% in January, indicating the housing market is stabilizing as the economy expands.

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According to some estimates US economy probably grew by 2.8 percent in the first quarter of 2010 after a 5.6 percent pace of expansion in the fourth quarter of 2009. Apart from the tightening in monitory policy by RBI the other trigger for the markets would be monsoon forecast. A healthy monsoon would improve agriculture output & thereby rural incomes. It would also be crucial from the inflation point of view, as it is still a worry factor & may affect the growth momentum.

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Tokyo-based Research Institute for Global Change has predicted normal monsoon rains in India for the current year. The Indian Meteorological Department (IMD) issues a monsoon forecast, usually in the second half of April after considering weather observations in different parts of the world and extrapolating statistical data.

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Overall trend of world stock markets is up and Commodities which were under pressure some time back also had a good rally last week. It seems now the mid cap and small cap are leading with mainline Nifty or Sensex lagging behind. The global liquidity is leading to various asset classes being chased by investors at every reaction. Nifty has support between 5150-5050 levels and Sensex between 17200-16800 levels.

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Firm U.S., Chinese and European manufacturing figures along with decline in SHFE and LME stockpiles may continue to keep the base metals on upbeat note. Lack of clear risk sentiment may keep gold directionless. Drop in U.S. jobless claims may lend further support to crude prices. Oil prices have risen about 23 percent from early February as the industrial sector leads a gradual recovery in the US economy. Possible new round of sanctions against Iran, maybe within weeks rather than months, could be underpinning the crude market.

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Spices pack may extend further gains while oilseeds may witness some short covering.