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MUMBAI, Nov 23 (Reuters) - Base metals demand in India could slow next week, particularly for lead and copper, as sales of cars taper off before picking up with new year registrations and buying of fans and air conditioners dips as winter sets in.
India’s automobile sales typically fall month-on-month in December after a strong demand in November, when a clutch of festivals prompts gift-giving, both large and small.
“Lead is mostly used for making batteries for cars, bikes and trucks, and a decline in automobile sales will have a direct impact on its demand,” said an official from Hindustan Zinc Ltd , India’s only producer of primary lead.
Last year, sales of motorcycles and cars fell 7 percent in December from the previous month, according to the Society of Indian Automobile manufacturers.
An expected fall in demand for power back-up devices which use batteries, as cold weather sets in during December and reduces the need for air coolers, could also cut lead demand in local markets, traders said.
Lead spot prices in India fell 0.49 percent to 140.7 rupees a kg on Thursday from 141.4 rupees on Monday, their highest level in the month and a rise of 7.4 percent since Nov. 1, according to HZL’s website.
HZL revises lead prices twice a week, on Monday and Thursday.
At 1133 GMT, the November lead futures contract on India’s Multi-Commodity Exchange (MCX) was up 0.71 percent at 120.35 rupees a kg from the previous close on Thursday, tracking firmness in overseas prices and in response to a weak rupee.
The partially convertible rupee, which plays an important role in determining the prices of dollar-denominated metals, fell on Friday to hit its lowest level against the dollar in over two months.
Traders expect copper demand to decline next week as falling temperatures with the beginning of the winter season could cut demand for electrical appliances such as fans, fridges and air-conditioners, particularly in northern India.
Copper in India is mostly used for making wire with a capacity of less than 1,100 volts and electrical equipment.
The metal is also used for making artefacts and alloys like brass, demand for which rises for the Diwali festival in November, traders said.
On Friday, the key November copper contract on the MCX was trading up 0.42 percent at 427.7 from Thursday’s close, buoyed by the weak rupee.
Three-month copper on the London Metal Exchange was trading nearly flat at $7,708.5 per tonne from Thursday’s close, after reversing initial losses, on hopes of a recovery in the global economy.
In the Mumbai spot market, copper prices were unchanged at 425.45 rupees per kg from Thursday’s close.
Zinc demand in India is likely to remain buoyant, despite the projected decline in automobile sales, on use by the construction sector, which has risen after the end of the June to September rainy season.
“Construction activities are likely to grow further as the government is pushing for infrastructure development in the country. And it will boost demand for both steel and zinc,” said Metulbhai Dalal, a metal dealer based in Mumbai.
Zinc is mostly used as an anti-corrosive agent for construction materials.
India, the world’s third-largest producer of zinc, has a capacity to produce around 1 million tonnes annually. HZL, controlled by Vedanta Resources, accounts for around 82 percent of total production.
Zinc in the local spot market rose by 0.2 rupees to 104.9 rupees a kg from Thursday’s close.
The November zinc contract was trading at 106.5 rupees a kg, up by 1.24 percent from Thursday’s close. (Additional reporting by Henry Foy; Editing by Anupama Dwivedi)