AFP: Base Metals lost 65% of their value in one year
Base metals once used to be the hottest commodities as the world was witnessing a construction, retail and information technology boom in the last few years. But in the last one year, base metals like nickel, copper, aluminium and zinc have been steadily losing in value that their stockpiles are jumping up and production cuts are increasing.
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.
