>COMMODITY MONTHLY UPDATE SEPTEMBER 2009 (INDIA INFOLINE)

The rally in metal prices which has been underway since the start of the year witnessed a minor halt last month. Most of the base metals ended in the red on a mom basis, as concerns over demand from China and the excess supply weighed on metal prices. The growth in supply has outpaced the pick-up in demand over the last two months, leading to a rise in inventory levels. The supply overhang, which has persisted since the October mayhem made its impact, as most metal producers have restarted or have announced plans to restart their manufacturing capacities. Though demand scenario has improved globally, the pace at which metal prices have gained has been higher than our expectations. The favourable commodity prices have led to an oversupply situation in the last two months. Inventory levels of most of the commodities have surged over the last two months. We feel that the upside for metal prices would be capped on account of the present supply overhang.

Dollar index slides to 2009 lows
The US dollar has tumbled in the last 30 days as the appeal of the currency as a safe haven has diminished. Data points released by most of the major nations have continued to show a rebound in their economies.

Base metals under pressure
Base metals were under pressure for most part of the month led by concerns over excess supply and a decline in demand from China. Most of the base metals ended lower on a month basis, with copper declining the most with a fall of 8%.

Global steel prices increase due to firm demand
Steel prices in China have declined ~12 over the past fortnight. Inventory levels in China have surged to three-month highs as export remain weak and production levels soar, recording an all time high 50.7mn tons in July.

To see full report: COMMODITY UPDATE