China has decided to go ahead with its plans to make use of the recession and prices fall, and stock base metals so that it can boost its future projects. This move has helped the prices of metals to go up.

Copper prices have benefited most from this shift in fortune and are already up approximately 25 per cent this year, compared to a decline of more than 50 per cent in 2008.

And Scotiabank’s base metals index was up 1.8 per cent in January 2009 after five consecutive months of declines.

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Thanks to a massive stimulus package, China has been buying huge quantities of metals, particularly copper — 300,000 tonnes so far, with an additional 900,000 tonnes expected — for its State Reserve Bureau to supply future development projects.

The Chinese economy is clearly boosting the market starting right now.

Added to that, a plan by the US central bank to pump more than $1 trillion into the American economy is driving the US dollar lower due to fears of inflation.

All goods priced in US dollars, including commodities, will have to rise because the US dollar is falling.

The buy-back of $300 billion of US government bonds will also help to ease the liquidity crunch and make it easier to borrow money and finance new projects.

Prices for copper, nickel and zinc soared in recent years until mid-2008 amid skyrocketing demand from surging economies like China and India.

But as the global financial crisis deepened through the end of 2008, prices for industrial metals slumped as demand for everything from appliances to cars to new homes fell.

At the end of the year, copper prices were down to approximately $1.50 per pound after reaching above $4 per pound in the summer, while zinc prices were approximately 50 cents per pound after reaching above $1.20 per pound in February. Nickel was approximately $4 per pound after hitting $15 per pound in February.

Last week, copper traded on the New York Mercantile Exchange was up to $1.82 per pound, zinc was 58 cents per pound and nickel was $4.56 per pound.

Several analysts believe the recent rise in prices indicates base metals prices have hit bottom and are on their way back up.

Many base metals miners, including Lundin Mining Corp. (TSX:LUN), HudBay Minerals Inc. (TSX:HBM), First Nickel Inc. (TSX:FNI), FNX Mining Co. Inc. (TSX:FNX) and Xstrata Nickel – responded to the slump in prices by temporarily shutting their less profitable mines.

Source: www.commodityonline.com

Copper price may stage some more recovery if LME warehouse copper inventories continue to drawdown. Though, recovery is unlikely to sustain for long owing to poor health of global economy and prevailing copper markets surplus.

Vedanta Resources Plc Chairman Anil Agarwal said he expects recession in the metal industry to continue this year. Aluminum continues to be a casuality of depression ropped to a seven-year low today as the global recession cut demand for vehicles and airplanes. Transportation is the biggest use of the lightweight metal, according to Citigroup Inc. China is expected to announce another bailout package worth $585-billion to aid its slowing economy. The aid is likely to increase investment in infrastructure and manufacturing sectors, according to reports. Towards weekend Aluminium gained marginally in India largest commodity bourse, MCX. Copper might fall this week on speculation that the worsening sentiment in the global economies could reduce demand for industrial metals.

Source: www.commodityonline.com

Aluminum inventories jumped a whopping 4.7% by 139,700 tonnes and crossed the three million tone mark. Despite of a sharp jump in inventories, the metal managed to end in the green. Copper prices bounced after a rare inventory decline of 0.2% that helped provide some relief to prices.

On the macroeconomic front, the US data was negative as housing starts and building permits dropped to record lows in January. The FOMC meet was also held yesterday and the Fed’s latest projection expects unemployment to rise as much as 8.8%. The FOMC also indicated that GDP could contract by up to 1.3% in 2009. This indicates a sharp contraction in economic activity.

OUTLOOK

With growing uncertainty over how long this recession could last, the base metals market seems to have factored in the most negative effect in its prices. We feel this because yesterday’s economic data was on the weaker side but some base metals like Copper, Zinc and Aluminum ended in the green. This is because markets already have discounted the worst case scenario and hence we expect them to remain range bound but the upside will be capped.

Inventory gain in base metals is bearish and this factor could also continue to cap the upside in prices. There could be some more production cutbacks as the surplus in most metals is rising. The strength in the dollar may put pressure on base metals as a stronger dollar makes base metals look unattractive and expensive for holders of other currencies.

On the macroeconomic front, the US is expected to announce data on Core PPI, PPI, initial claims, leading indicators and Philadelphia Fed today. Markets are expected to watch this data closely and may remain under pressure.

Source: www.commodityonline.com

Source: www.commodityonline.com   

Source: www.commodityonline.com   

According to market reports, copper had gained around 10 per cent on Monday. However, this has not helped boost the metal’s future as analysts fear that copper’s grim future will continue.

Copper for March delivery on the New York Mercantile Exchange’s COMEX division plunged 10.20 cents, or 6.4 per cent, to settle at $1.4845 a lb, after dealing between $1.4545 and $1.6250.

On Monday, the contract soared to its highest level since December 2 at $1.6310.

Analysts said bears are still in control, threatening to take the prices down to $1.25.

Copper for three months delivery on London Metal Exchange fell to $3223 a tonne and closed at $3310 a tonne, down from $3560 a tonne at the close on Monday.

Because of the build in short positions across base metals, copper in particular, prices are quite vulnerable.

But without any improvement in the fundamentals the gains are going to be short-lived.

Aluminium ended at $340 from $383 a tonne while nickel slumped nearly 7 per cent to a low of $11,160 a tonne before bouncing to close at $11,400 a tonne versus $12,050 on Monday.

Zinc fell to $US1145/1150 a tonne from $US1200 while lead was down at $US1145 from $US1185.

Courtesy: www.commodityonline.com

According to an analysis from Commodity Online Research, base metals have lost a massive 65% of their value in 2008. “Bearish trends are burning the base metals especially in the wake of declining US retail sales and slumping housing across the world, including Asia,” said the report.

Saying that base metals have lost as much as 80% of their value in the last 18 months, the report said base metal prices have undergone unprecedented falls thanks to the economic meltdown. “No other commodities have been hit so hard by the global economic downturn as base metals. For instance, supplies of copper will exceed consumption by 478,000 metric tons this year, triple last year’s surplus. The aluminum stockpiles in London Metal Exchange have risen 88,975 tons to 2.6 million tons, the biggest rise in the last 15 years,” said Commodity Online Research analyst Suresh Krishnan.

This week, copper for delivery in three months on LME dropped $45 to $3,205 a ton. Demand for copper dropped 10 percent in the US, the world’s second-largest buyer, in January through October compared with a year earlier.

Krishnan says all base metals are getting weakened on LME trading, as meltdown pressures are continuing amid growing concerns over mounting supplies and ever-shrinking demand.

This week, aluminum at LME fell $50.75 to $1,338 a ton and the metal even failed to benefit from announcements of further production cuts by Rio Tinto as it would reduce its aluminum production by another six per cent.

Nickel declined $425 to $10,800/ton as inventories increased to 79,932 tons, the most since July 1995. BHP Billiton Ltd., the world’s largest mining company, will suspend operations at its Ravensthorpe nickel mine in Australia.

Lead dropped $90 to $1,087 a ton even though fall in inventories by 75 tones. Tin dropped $150 to $11,350 a ton whereas Zinc dropped as much as 9.2 percent to $1,130 a ton, the biggest decline since Oct. 30. LME inventories climbed 4.3 percent to 288300.

So what is the outlook for base metals this year?

The report says that base metals will continue to be hit by the global economic meltdown and recessionary trends. China, the world’s largest copper user, used 15 percent less base metals in the first 10 months last year. Copper demand has dropped 2.8 percent in European Union countries and 1.9 percent in Japan.

Now the only hope for base metals is US President Barack Obama’s $850 billion government spending program to revive the economy. “This stimulus package, if implemented properly can help stabilize base metal prices. The most important thing is that base metals can not afford further production cuts,” the report added.

Source:  www.commodityonline.com

Global economic slowdown continues to worsen the demand outlook for Industrial Metals in 2009. Manufacturing conditions around the world have declined to unprecedented territory, industrial production has weakened substantially in most parts of the world and unemploymentis rising at an alarming rate.

Weakness seen in Auto industry and Construction has led to further deterioration in the base meals outlook. Rising inventories is an important feature, which has pressured prices in 2008, with demand not picking up in near term we expect the inventory levels to grow in coming months.

Substantial policy action by governments and Federal Reserves globally – including meaningful fiscal stimulus packages announced by China of $586 billion plan to improve national infrastructure and social welfare projects, should be particularly supportive of infrastructure-related metals usage, the benefits of these policies are unlikely to be felt in the markets much before 2010.

Moreover in response to the exceptionally weak demand conditions, sizable production cuts have been made across the metals and much more are expected in 2009. However later in the year with easing of credit crunch coupled with some stabilization in demand we could see a recovery in all metals.

Excerpt from http://www.commodityonline.com/news/How-commodities-would-perform-in-2009-13785-3-1.html

Copper, the leader of base metal pack, touched an all time high of $8930 in first week of July as rise in construction activity supported red metal. Nickel prices started the year on positive note, but could not hold on to its gain. Fall in steel demand put pressure on Nickel prices. Prices are trading at multiyear low.

Zinc was trading on weak note as rising inventory and heavy surplus from the beginning of the year weighed on metal prices. Lead prices succumbed to the pressure of global financial turmoil, as fall in demand for batteries put breaks on demand for this metal. Lead prices have fallen by more than 75% from its highs.

Since, Aluminum is energy intensive metal, fall in oil prices put downward pressure on aluminum prices. The combination of destocking and companies adjusting for the deteriorating economic outlook has lead to a freefall in base metal prices, but the rate of fall does now seem to be slowing with a number of metals turning sideways or even trying to edge higher.

China along with other industrialized countries have announced stimulus package to bolster their economy. We believe, that all these efforts will impact global economy after second half of 2009, after which demand for base metals can rise, prompting recovery in Base metal prices in the coming year.

We expect Copper prices to remain Bearish in the first half of 2009 and will trade in the range of Rs. 120/ kg to Rs. 200/kg in domestic markets and $ 2,500 / tonne to $ 4,400 / tonne at LME. In the latter half of the year, the prices may tend to get support from the economic packages announced by various Governments and we expect to trade in the range of Rs. 150 / kg to Rs. 250/ kg in Indian markets and $ 3,000 / tonne to $ 5,000/ tonne at LME.

Zinc prices likely to trade in the range of $ 950 / tonne to $ 2,500 / tonne at LME and Rs. 45 / kg to Rs. 120 / kg. Nickel prices would be tied to the fate of Steel industry and we expect the prices to trade in the range of $ 8,500 /tonne to $ 20,000/tonne at LME and Rs. 400 / kg to Rs. 960 / kg in domestic markets.

Courtesy: Angel Commodities and http://www.commodityonline.com/news/Year-end-review-Base-Metals-fall-to-recover-in-2009-13734-3-1.html  

Base metals fell sharply in the last week as the financial market mood continues to remain weak on concerns that the world economies are sinking into an intensifying recession. The current crisis is expected to continue well into 2009 as much the developed world is expected to remain in recession.

Since the developed countries are facing a crunch, the developing nations that depend on exports to these countries will also be hurt. Hence, all these concerns are leading to fears of lower demand in times of weakening global economic situation.

Since trade takes place on a global level, the crisis is into a two way street where no one can escape the effects of a massive pile up. Copper inventories continue to rise steadily and this situation indicates that the demand is weak. The metal has breached its important support of $3370 on LME and presently trades around the $3200 mark. Aluminum prices continue to face the pressure of falling crude oil prices ($45 levels) as a decline in oil prices means lower cost of producing primary aluminum as energy costs are approx 40% of total cost of production. This reduces concern over supply of aluminum in the market.

Courtesy: www.commodityonline.com