LME base metals face pressure following US Fed's rate decision; Zinc stocks gain 5%

On 31 January, 2024, most base metals prices on the London Metal Exchange (LME) experienced a decline, with the exception of aluminium. Simultaneously, LME warehouse stocks saw increases across various metals, excluding aluminium and copper. Zinc stocks notably rose by 5%, reaching 199,425 t from 189,925 t.

The decrease in base metal prices was attributed to the US Federal Reserve's decision to maintain interest rates, reflecting a prudent stance on potential cuts despite earlier forecasts. The Fed Chair suggested a probable conclusion to rate hikes but expressed uncertainty about future economic trends.

Three-month aluminium futures gained by 0.2% to $2,280/tonne (t). However, nickel prices dipped by 1.4% to $16,269/t, copper prices settled at $8,608/t (down 0.08%), zinc edged down by 1.4% to $2,527/t and lead dropped by 0.87% to $2,158/t.

COMEX market

Copper prices on the Commodity Exchange (COMEX) dipped by 0.3% to settle at $8,579/t compared to $8,601/t in the previous closing.

India's non-ferrous market

Aluminium

Aluminium ADC12 alloy ingot spot prices in India surged by INR 7,000/t to INR 197,000/t due to rising local and imported tense scrap prices, according to BigMint. The country's leading auto manufacturer set February 2024 settlement prices at INR 199,500/t, up by INR 8,500/t, reaching a five-month high.

Ahead of the Lunar New Year, aluminum ADC12 ingot supplies are constrained in the Chinese market. Simultaneously, a safety scandal at Toyota's small-car unit disrupted auto production in Japan, leading to a potential decline in January output, particularly impacting Daihatsu due to the production halt which might impact the ADC12 shipments to Japan.

Copper

Yesterday, the Indian domestic copper market witnessed a marginal rise in prices by up to 0.1%. BigMint's assessment for armature scrap stood at INR 678,000/t and secondary CC rod prices were at INR 720,000/t , both ex-Delhi.

Global updates

India's 2024-25 budget anticipation

Finance Minister presented India's interim budget for 2024/25, emphasizing economic transformation. The Interim Budget 2024 raises high expectations for India Inc. Corporate leaders anticipate measures promoting manufacturing and increased capex for infrastructure growth. With pressure to meet fiscal targets, the government might focus on precision policies to boost private investment in infrastructure projects.

The budget aims to address diverse needs, from tax relief for individuals to supporting industries, farmers, and climate change impacts. Amid a worryingly high unemployment rate, Budget 2024 could be pivotal, expanding production-linked incentives to labour-intensive sectors and providing tax relief for the middle class.

India's manufacturing PMI surges in January

India's manufacturing sector showed significant improvement in January, with the final Manufacturing PMI rising to 56.5, the highest in four months. Robust domestic and international demand boosted new orders, leading to increased raw material purchases and a positive outlook. Despite slight inflation, the Reserve Bank of India is not expected to cut interest rates until at least July.

Asian manufacturing: Mixed performances and divergent growth

January's manufacturing performance in Asia varied, with China's Caixin PMI at 50.8, indicating stability, while the official survey showed contraction. South Korea's activity expanded after 19 months, Taiwan and Malaysia contracted, and the Philippines slowed. Japan faced an eighth straight monthly shrinkage due to Daihatsu's production suspension, impacting the economy. India saw improved manufacturing. The IMF revised Asia's growth forecast to 4.5%, anticipating a divergent recovery, with Japan at 0.9% and India at 6.5%.

South Korea's January exports soar

South Korea's January exports surged 18.0% y-o-y to $54.69 billion, marking the largest increase since May 2022. A rebound in sales to China and a six-year high in chip shipments fuelled the growth. The positive momentum is reflected in the nation's factory activity, which expanded for the first time in over 1-1/2 years.

Boliden plans Tara zinc mine resumption

Swedish miner Boliden plans to resume operations at its Tara zinc mine in Ireland, Europe's largest zinc mine, in Q2 2024. The restart includes a modified schedule, with a one-week mill closure every three weeks, and aims to produce 180,000 t of zinc concentrates annually, down from 198,000 t. The proposal involves 150 job cuts. External market conditions remained unchanged, and negotiations are ongoing. Zinc prices are 25% lower than last year, reflecting a projected 2024 surplus of 300,000 t.