Mumbai, May 15: Base metals melted today on the global commodity exchanges and the domestic market followed suit.

In India, a lack of industrial demand at higher levels coupled with lower advices from the London Metal Exchange (LME) saw the metal prices decline sharply, also triggering a meltdown in metal scrips.

“The recent spurt in metal prices was mostly due to covering of short positions. There was no fresh buying,” said Sunil Ramrakhiani, head of IL&FS Investsmart Commodities.

“As there was no fresh buying in metals, the market did not have any support and thus fell suddenly. The fall was aided by strong profit booking,” said Ramrakhiani.

Globally, copper, zinc and aluminium prices plunged. Silver and gold also declined in London.

Copper for delivery in three months on the LME fell $760 to $7,700 a tonne. Copper prices had jumped 93 per cent this year.

Zinc lost 11.2 per cent at $3,250 a tonne, the largest one-day drop since July 1997. Domestic zinc prices had zoomed by 159 per cent from Rs 75.25 per kg on August 1, 2005 to Rs 195 per kg on May 1, 2006. Today, Nickel dropped by Rs 55 per kg to Rs 1000, follower by copper scrap heavy by Rs 18 per kg to Rs 400. Brass utensils scrap fell by Rs 16 per kg to Rs 240, zinc by Rs 5 per kg to Rs 190, tin by Rs 5 per kg to Rs 530 and lead by Re 1 to Rs 71.

Market analysts said an expected rise in interest rates in Japan saw a sell-off by hedge funds in the commodities market, as they had built up huge positions on borrowed funds from Japan.

After scaling a 26-year high and a 40 per cent rise this year, gold declined 2.7 per cent at $695.75 an ounce. Silver, which had risen almost 53 per cent this year, also fell 5.1 per cent at $13.64 an ounce.

The MCX metal index today closed at 2809.48, down 149.65 points or 5.33 per cent.

“Today’s fall in an overheated market would work as a technical correction and open entry points for new investors,” Ramrakhiani said.

“Going forward, we see a downward movement in metal prices, after which it is expected to consolidate,” he added.

Last month, aluminium majors, including Hindalco and Nalco, had announced big price hikes with Hindustan Zinc following suit on the back of rising base metal prices.

Nalco had raised prices of aluminium products for sale in the domestic market by Rs 4,000 per tonne. The average rate of various grades of aluminium ingots was raised to around Rs 1,27,000 per tonne.

Hindalco also raised the prices of aluminium by Rs 4,000 per tonne, from Rs 1,23,300 per tonne earlier for primary aluminium and extrusions.

Hindustan Zinc Limited had increased its price by 2.29 per cent from Rs 1,57,100 per tonne to Rs 1,60,700 per tonne.