Base Metals Hit by China Rate Hike

NEW YORK (TheStreet) -- Base metals were lower Wednesday as most Asian equities declined. With no economic data releases scheduled for the day, base metals may hit fresh intraday lows as selling pressure is mounting on the complex due to surging volumes.

China's surprise move to increase both the benchmark deposit and lending rates by 25 basis points for the first time since 2007 had an immediate impact and commodities tailed lower on Tuesday. Investors await the release of China's gross domestic product, inflation, and industrial production data on Thursday for insights into Beijing's decision to hike rates.

Copper

Copper for three-month delivery plummeted 1.1% to $8,170 per metric tonne on the London Metal Exchange as China's higher borrowing costs firmed the dollar. Inventories fell by 500 tonnes to 369,950 million tonnes. The red metal finds support and resistance at $8,119 and $8,412, respectively.

HSBC Holdings raised its 2011 and 2012 estimates for copper by almost 16% and 19%, respectively, as the continuing strength across Asian markets will offset the weakness in developed economies and support copper prices, Bloomberg reports.

Southern Copper(SCCO), which closed at $40.81 on Tuesday, finds support at $40.28 and faces resistance at $41.34. Freeport-McMoRan Copper & Gold(FCX) closed at $92.72 with support and resistance at $91.62 and $94.21, respectively. Teck Resources (TCK) closed at $42.53 with support at $41.78 and resistance at $43.37.

Aluminum

Aluminum for three-month delivery declined marginally to $2,357 per tonne on Wednesday. Inventories added 3,950 tonnes to stand at 4.32 million tonnes, halting the long streak of declines to 52-week lows. The metal faces support and resistance at $2,305 and $2,401, respectively.

HSBC Holdings has revised 2011 and 2012 aluminum price estimates by almost 16% and 18%, respectively.

Alcoa(AA) closed trading at $12.67 Tuesday, finding support and resistance at $12.52 and $12.89, respectively. Century Aluminum(CENX) closed at $12.93 with support at $12.60 and resistance at $13.42. Kaiser Aluminum(KALU) closed at $44.53, finding support at $43.91 and resistance at $45.37.

Nickel

Nickel for three-month delivery dropped 0.3% to trade $23,399 per tonne on the LME. Inventories were up 282 tonnes to 124,104 tonnes. Support and resistance levels are seen at $22,867 and $23,867, respectively.

International Nickel Study Group estimates global primary nickel output during 2011 at 1.61 million tonnes, about 180,000 tonnes higher than the 1.43 million tonnes forecast in 2010. Meanwhile, consumption for 2011 is pegged at 1.53 million tonnes, up 100,000 tonnes from the estimated 1.43 million tonnes for 2010.

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