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India Base Metals: Down on China realty debt crisis, power reforms

Informist, Thursday, Oct 21, 2021


By Sharathkumar Nair


MUMBAI – Base metal contracts on the Multi Commodity Exchange of India fell today taking cues from their parent contracts on the London Metal Exchange as investor sentiment weakened after Evergrande, a Chinese property company, inched closer towards a possible collapse. China is the top consumer of base metals globally.


* Evergrande cancelled an agreement to sell controlling stake in its property management unit to a Chinese developer, Hopson, for about $2.6 bln. Investors feared a possible collapse because the company is suffering a severe cash crunch and might not be able to manage its debt of more than $300 bln.


* Investors feared that a potential collapse of Evergrande would lead to a slowdown in China’s realty sector. China real estate sector is one of the top consumers of base metals.


* Evergrande, Fantasia Holdings and other property developers in China have been defaulting on their dollar bonds. The ongoing debt crisis at Chinese property developers has slowed down the housing market in the country, dampening the demand for base metals. 


* In the last six trading sessions, prices of most base metals had surged and hit lifetime highs on the domestic bourse and on LME due to a supply crunch caused by shortage of power in China, which is the top producer of base metals.


* China imported 21 mln tn of coal from Indonesia in September compared with 17 mln tn in August to mitigate the power crisis caused by the severe coal shortage in the country.


* National Development and Reform Commission, China’s top economy planner said it would loosen the state-controlled power market, allowing industrial and commercial users to buy electricity at market prices.


* Chinese power companies were not allowed to pass on higher prices to consumers even when the prices of coal sky-rocketed. This forced many power companies to curb their output to avoid losses, further worsening the power crisis in the country, analysts said. China is heavily reliant on electricity produced by thermal stations, which use coal as their fuel source. 


* Zhejiang and Guangdong were the only two provinces in China that hiked power prices, but reports confirmed that other provinces were planning to hike power rates as well.


* ALUMINIUM prices were trading lower as downstream demand for the metal fell due to the ongoing power crisis in China. “On the demand side, the power rationing has restrained the downstream demand, so the aluminium ingot social inventory has been falling for six weeks in a row,” Shanghai Metals Market said in a report.


* At 1900 IST, on the MCX, the September futures contract of

  –Aluminium was at 241.2 rupees a kg, down 2.6%

  —COPPER was at 775.5 rupees a kg, down 2.3%   

  —LEAD was at 188.3 rupees a kg, down 1.7%

  —NICKEL was at 1,584.1 rupees a kg, down 2.2%

  —ZINC was at 291.2 rupees a kg, down 3.4%


* Outlook for the evening session on MCX:

  –Aluminium contract seen 242.2-253.3 rupees per kg

  –Copper contract seen 789-802 rupees per kg

  –Lead contract seen 186.6-193.2 rupees per kg

  –Nickel contract seen 1,493-1,579 rupees per kg

  –Zinc contract seen 265.4-334.2 rupees per kg




US$1 = 74.86 rupees


Edited by Patricia Hou


Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.


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Source: Cogencis

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