Metal Prices to Fall Further on US, European Debt Fears

SHANGHAI, Nov. 22 (SMM) -- LME base metals prices continued to fall yesterday. Shanghai metal prices seemed to stabilize, but there is still a possibility that metal prices will fall further in the short term since US and European stocks plummeted again yesterday.

Fears of US and European debt issues and expectations of a slowdown of global economic growth continued to depress market sentiment. Moody's warned France on Monday that a sustained rise in its debt yields could harm its ratings outlook. The failure of a "super committee" of US lawmakers to reach agreement on a deficit cutting plan triggered investor concerns over the US economic outlook, coupled with weaker-than-expected US economic data, global financial markets were depressed again, and US and European stocks plummeted in response, with US stocks falling around 2% on November 21st. Dow Jones Industrial Average closed at 11,547.31 points, down 248.85 points or 2.11%, the lowest level since October 20th. European stocks plunged as well, with the benchmark Stoxx Europe 600 Index closing down 3.2% at 224.76 points. 

The US dollar index strengthened supported by risk-aversion buying, and commodity markets experienced a broad sell-off again. LME base metals prices closed down on November 21st. LME three-month copper contract prices closed at USD 7,310/mt, down USD 215/mt, with prices once hitting a one-month low of USD 7,252/mt. LME three-month aluminum contract prices closed down USD 43/mt at USD 2,067/mt, LME three-month zinc contract prices closed down USD 50/mt at USD 1,915/mt, and LME three-month lead contract prices closed down USD 66/mt at USD 1,993/mt. No progress has been made in resolving US and European debt problems, hurting investor confidence, and in this context, SMM predicts base metal prices will continue to fall in the near term.