Base metals were strong around month end on the basis of the possible further cut in interest rates, and also as a defense against potential spikes of inflation and the lower US dollar. Gold hit levels not seen since February 1980 at more than US$ 740 after the US dollar sank to record lows against the euro. Bullion was also benefiting from its status as a safe haven asset during current market turbulence. Copper rose to its highest level since late July of above USD 8,000 on declining LME inventories and ongoing worries over possible supply disruptions in

South America. Lead and zinc both found support from further declines in LME stocks.
 
The US Federal Reserve cut its main interest rate by 50 basis points to 4.75 percent on September 18 and also cut the discount rate - at which it lends directly to banks - by 50 basis points to 5.25 percent in an effort to stimulate the US economy. The move has been well received in commodity markets, the base metals sector posting the strongest gains given the relationship between metals prices and the global growth outlook.
 
The euro surged to the psychological important US$ 1.40 level against the US dollar for the first time on September 20, which is seen as a pain barrier for eurozone exporters.
 
German business confidence readings fell to a 19-month low on credit concern and soaring euro.
 
Booming domestic consumption in China and India will lead to robust economic growth in Asia this year and next year in spite of turmoil on global credit markets and a US slowdown, the Asian Development Bank has forecast. The bank sharply increased its 2007 growth forecast for Asia excluding Japan to 8.3 percent from the 7.6 percent it predicted just six months ago. For 2008, the forecast was raised to 8.2 percent from 7.7 percent.

In London, the Lead cash settlement price was US$ 3,600 per ton while the Zinc cash settlement price was US$ 3,086 per ton on September 27, 2007. 

Lead prices continued its upward trend, surging above the US$ 3,500 a ton on worries over falling Chinese exports and possible further supply disruptions in Australia. Zinc has underperformed other base metals this year, coming under significant downward pressure as the market has focused on the growing supply of zinc concentrates. 

Demand for lead from battery manufacturers is reported to be rising ahead of winter and available stocks have shrunk to critical levels. LME stocks stand at just about 20,000 tons, a 17-year low, and sufficient for less than one day of global consumption. According to Calyon Corporate and Investment Bank, China will consume more than 30 percent of the world’s lead by the end of 2007 as it needs lead batteries to supply its burgeoning car demand. 

Hindustan Zinc is on target to commission its 170,000 tons per year zinc smelter at Chanderiya in Rajasthan in early 2008, according to the parent company Vedanta Resources. The smelter, along with a second new 88,000 tons per year facility in Debari, will take HZL’s zinc capacity to more than 600,000 tons per year.

In London, the Copper settlement price was US$ 8,145 a ton with a backwardation of US$ 74 on September 27, 2007. 

The copper market deficit widened dramatically in the first six months of 2007 as Chinese demand for the red metal soared, the International Copper Study Group said. The market recorded a production deficit of around 340,000 tons in the period, against a deficit of 3,000 tons in the same period last year. 

Uncertainty over future supplies from major copper miners fuels the bullish sentiment on the copper market. The ongoing strike action at Grupo Mexico’s Cananea mine has forced the company to renegotiate some shipments for lower tonnages and cancelled some forward orders to clients as the disruption moves into a seventh week. Uncertainty also remains over the potential industrial action at operations run by Southern Copper Corp where workers approved a plan to strike on October 2. 

Chile exported US$ 24.83 billion worth of copper during the first eight months of the year, up 12 percent from US$ 22.19 billion from the same period of last year. Chile is the world’s largest copper producer, with output of 5.38 million tons last year.

In London, the tin settlement price was US$ 15,380 per ton with a contango of US$ 120 on September 27, 2007. 

Tin recorded a small deficit in the seven months of 100 tons because refined production fell by around 2 percent to 208,600 tons, according toe US-based World Bureau of Metals Statistics. Demand dropped by 6 percent, with reduced consumption in Japan and   a lack of significant growth in China responsible for most of the market weakness. Indonesia is the world’s second largest tin producer after China. Indonesian production has sharply fallen since the end of 2006 when the government clamped down on illegal mining. 

Peru ’s Funsur tin refinery, which a capacity to produce 40,000 tons per year of tin and has been shut down since a mid-August earthquake, was restarted early September and output was due to return to normal. 

Three major private tin smelters on Indonesia’s Bangka island have halted production indefinitely. The three smelters - CV DS Jaya Abadi, PT Bangka Putra Kanya (BPK), CV Donna Kembara Jaya (DKJ) - were asked by government officials to stop production to “cool down” the tin industry. DS, BPK and DKJ exported 8,370 tons, 7,800 and 7,380 tons of tin respectively last year. Recent exports from Indonesia have come mainly from PT Timah, PT Koba Tin and the three smelters.

In London, the Gold AM fixing was US$ 729.75 per ounce and spot Silver traded at US$ 13,51 per ounce on September 27, 2007. 

Gold reached its highest price for almost 28 years as investors rushed to buy the yellow
metal amid US dollar weakness. Higher oil prices and financial turbulence have contributed to the rise in gold prices as some investors consider it a hedge against inflation and a safe haven. Investor appetite for gold exchange-traded funds has increased sharply. ETF securities in London said the money invested in its gold ETF has jumped 240 percent in the past 2 months. 

BHP Billiton, the Australian miner, has announced an 11 percent upgrade to estimated gold reserves at its Olympic Dam project, with an estimated 79 million ounces of gold, compared to 2006 guidance of 71 millions ounces. The company is conducting a pre-feasibility study to convert the copper-gold mine from an underground to an open-cut operation, which will allow for increased output. The expansion is expected to lift silver and gold capacities to 2.9 million ounces per year and 500,000 ounces per year respectively. The mine produced 176,071 ounces of gold and 36,565 ounces of silver. 

South Africa continues to report disappointing production data, with gold output falling by 5.2 percent year on year in July 2007. It produced 63,517 kg of gold during the second quarter 2007, down 7.5 percent from output in the same period in 2006. South Africa remains the world’s largest gold producer, but production has been declining steadily since the 1970s.

In London, Nickel traded at US$ 32,510 per ton, equivalent to US$ 14.75 per pound on September 27, 2007. Cobalt min. 99.8% traded at US$ 29.375 per pound and Cobalt min. 99.3% at US$ 28.625 per pound on September 26, 2007. 
 
The price of nickel has been rising recently in response to increased demand from China, which is the world’s largest consumer of the metal. The country’s demand for nickel, which is used in the production of stainless steel, increased 35 percent in the first seven months of 2007. Growth in the Chinese market is currently offsetting a fall in demand from Western Europe and other Asian countries, where the steel industry is cutting back production.
 
India ’s nickel imports are set to rise 10 percent this year, helped by a sharp fall in world prices and rising consumption of stainless in the country. Two-thirds of nickel output is used to make stainless steel. India , which does not produce the metal, is likely to buy 45,000 tons in 2007, according to the Indian Stainless Steel Development Association. Last year, India had imported about 40,000 tons of nickel. India’s heavy investment in construction of high-rise buildings, heavy machineries and bridges was boosting demand for stainless steel. The outlook for demand in India is strong with plans underway to build airports, underground and elevated rail lines .