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Base Metals Market Briefing - May 18, 2009
Base metal prices too far too fast?
Base metal prices in late April and early May performed as if we
were still in a supercycle rather than as if we are
in the middle of the sharpest decline in industrial output since
World War 2. There are some aspects of this cycle (particularly
on the supply-side) which makes us bullish about the medium term
prospects for the sector out to 2012; however prices in the short
term have got ahead of the fundamentals. We believe that there is
still a disconnect between the physical market and the
recent rally on the LME.
Although we note that green shoots are beginning to emerge in terms
of some of the economic indicators, most of the evidence still points
to only a slow recovery in activity. The IMF has just released its
latest bi-annual forecasts. The recent rebound in prices is not
quite in line with the IMF view: Even with determined steps
to return the financial sector to health and the continued use of
macroeconomic policy levers to support aggregate demand, global
activity is projected to contract by 1.3% in 2009. This represents
the deepest post-World War 2 recession by far. The organisation
is now only projecting 1.9% expansion in 2010.
Is a recovery really imminent?
Nevertheless, the modest improvement a number of headline economic
indicators published recently has resulted in some optimism being
formed in global markets, with some participants even interpreting
the data as early signs of recovery. The OECD Leading Indicators
for a number of key markets inched up in March. Nevertheless, the
overall OECD LEI continues to forecast a contraction in economic
output through the second and third quarters of 2009. The LEI weakened
to 92.2 in March from 92.4 in February.
> This article gives the introduction to our latest detailed
analysis on the market. To access a full version of a recent detailed
monthly report on the base metals markets plus a recent briefing
update, click on the links below.
> Base
Metals Market Briefing - December 9, 2008.
> Base
Metals Market Briefing Update - December 16, 2008.
Disclaimer:
Whilst every effort has been made to ensure the accuracy of the
information used in this document, GFMS Metals Consulting cannot
guarantee such accuracy and GFMS Metals Consulting does not accept
responsibility for any losses or damages arising directly, or indirectly,
from the use of this information.
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