Growth in base metal prices set to continue

Despite investors continuing to look to gold, in recent years it has been the base metals that have seen the strongest price rises.

The consumption of base metals is unlike that of gold in that it is dependent on supply and demand factors and linked to economic growth worldwide.

In China the economy is current growing annualy at over 11% and whilst other economies may be slowing down, they are still recording some growth.

The price of base metals is also determined by the cost and time involved in developing a new mine. This can take up to ten years and a minimum of four.

The major base metal mining companies are currently fully occupied trying to complement the fall-off in supply from aging operations.

The time factor is particularly relevant as four years ago base metals prices were static and mining companies were loath to commit themselves to new operations.

However, since 2003, the price of copper has increased fivefold (in US dollar terms). For zinc the increase has been fourfold and for lead, sevenfold.

By comparison, the price of gold has roughly doubled since 2003 and investors may well be questioning whether growth rates for base metals are sustainable.

They may also be concerned about a fall in price in the longer term but this is unlikely as long as the Chinese manufacturing sector continues to grow rapidly.