Commodity in general can be divided into two broad categories Base and Precious. Today we discuss the scope and nature of base metals Base metals which have active trading interest and industrial uses are Copper, Zinc, Lead, Aluminum, Nickel and Tin. These commodities are traded across major bourses all over the world. The most notable among them is LONDON METAL EXCHANGE.
When we talk about Base Metals we cannot ignore the demand and influence of CHINA over base metals. CHINA accounts for approximately 40% consumption of all base metals produced globally. Base metals have various usages such as steel, automobile, aviation, construction, electronics and others. The health of global economy and manufacturing industry in particular can result in demand for the base metals or vice versa.
The pattern in the last 5 years for base commodities has been downwards with a negative bias. With Chinese economy slowing down and Europe facing economic headwinds the demand for base metals has been weak. Moreover the supply side of base metals has improved considerably. U.S has been an exception as its economy has been looking up. Major central banks globally are restoring to physical stimulus in order to support their economy whereas U.S is looking to increase rates so that it doesn’t fall prey to overheated economy.