Base metals witnessed range bound trading session and ended the day with negative bias, Copper and zinc shed more than 4% discounting the flu to snow ball into a pandemic and derail the global economy's nascent recovery.

Nickel fell by 5.4% on account of heavy selling by traders and speculators in tandem with a weakening global trend. Reduced off take by consuming industries, such as stainless makers also weighed on nickel prices.

The World Steel Association short term forecast released on Monday is that the global steel demand for 2009 might witness a fall of up to 15% from 2008, the steepest since World War II, citing the global economic downturn as the cause.

The International Copper Study Group (ICSG)’s monthly bulletin reports the world copper market seeing a surplus of 155,000 tonnes in January compared with a deficit of 22,000 tonnes in January 2008.

The global nickel market will be in an 80,000 tonnes surplus in 2009, as falling demand continues to outpace cutbacks made by producers, the International Nickel Study Group (INSG) said. It expects world production to fall to 1.26 million tonnes this year (from
1.39 million tonnes in 2008) and consumption to fall to 1.18 million tonnes from 1.29 million in 2008. It doesn’t anticipate a recovery in the primary nickel demand and stainless steel production until the second half of 2009.

In spite of consistent negative inventories, prices are moving southwards Chinese buying was seen fading and investors are worried about the recent outbreak of Swine Flu which is a threat to already fragile world economy.

Due to weaker INR we might see some upside initially but rallies should be sold during the day. We recommend selling non ferrous metals at rise during the day.

Copper doesn't look very bullish technically and is facing strong resistance at 223.9. This, we believe, is a very important resistance with a support at 211.70. We recommend selling copper between 221-222 with a Stop Loss of 224 targeting 216.50. Observing from the highs of 242.6, 50% retracement turns out to be at 211.7. Hence it might not go below that level. If one looks at the trend line, a closing below 218.70 makes it looks weak.

Zinc too, technically looks weak as prices eased by more than 3% on MCX and on LME. After yesterday’s fall we believe prices can move down and touch Rs. 65.9/kg on MCX and a good support is pegged at 65.9 because of a 50% retracement level with respect to the high of 76.7. We recommend to book profits on shorts at these levels as market looks oversold.

Nickel we believe, is trading in range from 545-570 since last three sessions. The upside is capped at 574.2. We recommend initiating long positions if prices give close above 575. On the downside, we see a good support pegged at 545.50 breaching that we might see Nickel testing 534.4 levels.