The global economic recovery suffered a recent blow from developing debt crisis in the Euro zone. The US dollar strengthened as investors sought to minimize risk, pushing the US dollar index above 80, which in turn weighed down base metals markets. At present, there is a lack of market direction in base metals markets, and as a result, prices are expected to fall further.
Copper: China experienced slower growth in new copper smelting capacity during 2009 due to the global economic recession, but China's copper smelting industry is expected to enter a period of rapid expansion during 2010. Based on CBI data, a total of 1.94 million mt of copper smelting capacity will be under construction or come online in 2010-2011, and by the end of 2011, China's copper capacity is expected to exceed 7 million mt. (Page 3)
Aluminum: Unexpected action by the government to curb lending in China, an uncertain global economic outlook, as well as weak demand prior to the Chinese New Year holiday, contributed to the latest round of declines in base metals prices. In this context, aluminum prices should recover when domestic aluminum consumption improves. (Page 7)
Zinc: The average capacity utilization rate at domestic zinc smelters was 83.5% during January. (Page 8)
Lead: Last week, strong speculation caused LME lead prices to briefly rebound to USD 2,100/mt. Domestic lead markets reported improved trading sentiment as the Chinese New Year holiday approaches, with prices nearer the high end of RMB 15,300-15,600/mt range. (Page 11)
Nickel: A stable NPI market is expected in the run up to the Chinese New Year holiday (Page 15)