03.21.09
Base metals prices bottoming out, some on their way back up: analysts
analystsSource: The Canadian Press
Posted: 03/20/09 4:02PM
Filed Under: Business News
TORONTO – With shrinking inventories, a jump in Chinese demand and a lower U.S. dollar, many analysts say base metals prices may have bottomed out and could be on their way back up.
Copper prices have benefited most from this shift in fortune and are already up approximately 25 per cent this year, compared to a decline of more than 50 per cent in 2008.
And Scotiabank’s base metals index was up 1.8 per cent in January – the most recent month for which data is available – after five consecutive months of declines.
Bob Tebbutt, an analyst with Peregrine Financial Group Canada, said base metals prices are currently being pushed higher by two major drivers: improvements in the Chinese economy and higher prices for commodities sold in U.S. dollars.
Thanks to a massive stimulus package, China has been buying huge quantities of metals, particularly copper – 300,000 tonnes so far, with an additional 900,000 tonnes expected – for its State Reserve Bureau to supply future development projects.
“The Chinese economy is clearly boosting the market starting right now,” Tebbutt said in an interview.
Added to that, a plan by the U.S. central bank to pump more than US$1 trillion into the American economy, announced Wednesday, is driving the U.S. dollar lower due to fears of inflation.
