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BASE METALS | Demand Worries


The 30% dip in copper and aluminium prices last year and nickel tumbling to 12-year low is stoking worries over earnings of major metal producers and miners globally. By Nidhi Modi


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for long. Copper, aluminium and steel showed modest gain after falling for nearly the whole of 2015. But there is no signal to the end of price pressure on the metals sector. The economy in world’s largest consumer of metals, China, looks more fragile compared to 2015 as manufacturing numbers continue to disappoint. Demand is yet to pick up in China and government efforts to get growth back is yet to show results. “Metals prices decreased by 3.7% in December, down a third consecutive month. During 2015 the metals index fell about 30% on slowing demand growth in China, and ample supplies generally”, IMF said in its January report on commodity market. In line with other metals, copper


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prices also stabilised in December after falling in November last year. Copper producers remain a worried lot


he dawn of the new year has brought a respite to the metals sector that has been battered


as a 30% price cut in 2015 is making a dent in their earnings and liquidity. Companies are driven to cut costs and send out a positive signal to investors. NYSE listed Freeport McMoRan, one of the largest copper producing companies in the world, recently announced suspension of its annual dividend payout that is estimated to save $240 million a year. Decisions like these are reflective of the tough operating environment that producers are facing. But weakening demand along with a reluctance of producers to cut output is adding to stocks. In spite of low prices, the reluctance shows that producers remain wary of letting competition take away market. Aluminium price recovered by about 3% in early January. The increase, however, has to be seen in the context of a 30% decline in prices last year. The appetite to buy the metal is lower than the pressure to sell. The State Reserve Bureau, China, announced plans to buy a million tonne of the metal to


www.wealth-monitor.com | February 2016


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