Base metal prices a mixed bag in `08

   2006           2007             2008

% Change

2006-07     2007-08

Aluminium2567264029002.89.8 Copper6731712682005.915.1 Nickel24287371812600053.1-30.1 Lead128825952800101.57.9 Tin8763145362000065.937.6 Zinc327332502350-0.7-27.7  In the wake of projected surplus of 145,000 tonnes this year, its average price may stay around $2,350 per tonne, roughly in line with its average price in the first quarter of this year.  About nickel, Natixis says that a sharp decline in prices reflects slowing demand and rising inventory, from under 5,000 tonnes in late 2006 to above 50,000 tonnes in early May. The initial sharp decline in prices came on the back of a small rise in inventory.  Given sharp cutbacks in stainless steel production, the demand for nickel slumped in 2007 and has still not recovered. However, with an estimated improvement in stainless steel production in the first and second quarters, nickel demand should rebound soon.  The market is likely to be in a surplus of 10,000 tonnes this year with the price of the metal averaging $26,000 per tonne in 2008.  In May, the price of lead was 40 per cent below the bull market peak of $3,975 per tonne registered in October 2007. Overall, the metal is projected to remain in surplus of 50,000 tonnes and price is forecast to average $2,800 per tonne this year.  The main support for aluminium price has come from rising production cost (witness the flat nature of far forward prices on the LME) rather than from supply-demand fundamentals, according to the Natixis report.  This may support prices around its current levels ($3,000/ tonne). Despite forecasting a surplus of 215,000 tonnes this year, a weak dollar and high energy prices may continue to support aluminium price moving forward to average at $2,900 per tonne.  In the short term, the copper market may see new highs as myriad problems afflicting the supply side are likely to stay in force. Although supply disruptions will no doubt remain a feature of the copper market, most of the multi-year labour contracts have been renewed.  However, the price of the red metal is expected to remain above $7,000 per tonne for much of the second half of this year to average at $8,200 per tonne with a projected market surplus of 25,000 tonnes.  Further tightening of the market and the prices seen going up until late April have encouraged the short-term price forecast to be positive. A modest improvement in Chinese production, in particular, should see the annual tin price in 2008 averaging $20,000 per tonne.