Weakening dollar props up base metals rally


Rolls of copper sheets. Copper — a bellwether for the global economy — rose as much as 2.4% to $ 9,780 a tonne in London last week, the highest since August 2011. An IAC file photo.

The stimulus packages being announced across the globe amid the Covid-19 pandemic, are benefitting base metals Copper, zinc and nickel have been rallying for the last 8 months as a broad-based weakening of the dollar made commodities cheaper for holders of other currencies.

Besides, supply constraints from the pandemic-hit Latin American nations provided support to the metals, said brokerages. Recently, the announcements of successful trials of multiple vaccines have also given a sentimental boost to the riskier assets such as crude oil and industrial metals, they said.

Amalysts are expecting copper to cross $7,500 per tonne mark in the next four to five months as demand recovery from China, the world’s largest consumer of copper, has been robust. Currently, copper is hovering at around $7,000 per tonne on the London Metal Exchange (LME). Among the base metals, copper is the most liquid metal in terms of trading and usually sets the tone for the other metals. However, this time around, the trend is slightly different.

Aluminium, a light-weight metal largely used in beverage cans and automobiles, is expected to witness a price correction due to weak fundamentals. While aluminium prices have also rallied in recent past, analysts feel the metal is in surplus and may soon see a correction. Aluminium on the LME is at around $1,930 a tonne at present.

In the domestic market, Hindalco Industries, National Aluminium Company Limited and Vedanta are three large aluminium players.

Nickel, the key metal required in the making of stainless steel is expected to do exceptionally well in 2021, said analysts. Most new projects in the infrastructure sector are increasingly preferring stainless steel over steel or iron due to its non-corrosive nature that improves longevity of the project. This might boost nickel prices in 2021. Prices of the metal could touch $19,000-19,500 a tonne in 2021. Currently, nickel prices are at $15,690 a tonne.

Demand for electric vehicles is also seen strong from China as the country moves towards green energy. This will also support prices as more charging stations will be needed across country leading to increased demand for nickel. While Jindal Stainless is the biggest stainless steel producer in the country, other primary producers such as Steel Authority of India (SAIL) also make stainless steel products.

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