Base metals demand to remain strong

GFMS Metals Consulting, the market analyst, has reported that the base metals market continues to be governed by fundamentals that were in place a year ago.

To summarise: most aspects of the fundamentals remain favourable; underlying demand growth remains firm following previous destocking; strong demand is expected to come from the semi-manufacturing sector (where a product remains unfinished); Chinese demand will increase in 2008; raw material prices will tend to reinforce the tight supply situation (particularly in the case of copper, as miners are in a strong position with regard to negotiations with smelters).

At the end of September 2007 only aluminium and zinc prices were lower than at the same point in 2006, however, GFMS does expect price decreases in a number of base metals in 2008.

The analyst also takes the view that the US sub-prime crisis will have a limited impact on base metal performance in the coming months. Demand is likely to be less in some residential construction and automotive markets.

During the remainder of 2007, GFMS expects weak Japanese and US demand continue. Demand from Europe, India and China should remain strong and some recovery is expected in the US and Japan in 2008, at a point when Euro-zone growth is forecast to slow.