Commodity markets observed a historic moment on 13 March with gold touching the key US$ 1,000 level for the first time and spot oil prices hitting a new peak of US$ 111 a barrel before dropping back. US dollar is widely seen as a key factor fuelling the record-breaking runs being seen in energy, metals and agricultural markets as it reduces the prices of commodities to overseas buyers. A significant trade for hedge funds this year has been to sell the US dollar and to buy commodities but recently an avalanche of selling swept across metals before the Easter break. Risk reduction was a driver of the sell-off as funds locked in profits and moved into the safety of cash.
In the US, moving to rejuvenate an economy hit by the housing slump and the credit crisis, the Fed lowered its key federal funds rate by three-quarters of percentage point to 2.25 percent, its lowest level since December 2004.
Sales of previously owned homes in the US rose for the first time in seven months in February, while sale prices fell by their most in at least 40 years. Existing home sales rose by 2.9 percent to a seasonally adjusted annual rate of 5.03m units in February, still 23.8 percent lower than a year ago.
Germany’s economy remains in robust shape, with exports seeing the fastest growth in 16 months at the start of the year. Exports rose by 3.8 percent in January, compared with December. It is the biggest monthly increase since September 2006. Imports rose by 4.2 percent in January, after a 5.4 percent increase in December. The Ifo business climate index rose from 104.1 in February to 104.8 in March, climbing for a third consecutive month.
China’s trade balance moderated in January and February. The surplus was $ 28 billion for the 2 months, down 29 percent year on year. Over the same period, the domestic economy has remained strong, reflected in import growth of 31 percent year on year, compared to a 16.9 percent rise in the value of exports.

In London, the Lead cash settlement price was US$ 2,793 per ton while the Zinc cash settlement price was US$ 2,303 per ton on March 31, 2008.
The medium-term price outlook for zinc remains weak as significant supply surpluses will continue for the next two years, analysts said. Global zinc production outstripped consumption in January by 26,600 tons, as usage lagged behind increased mine and metal production, the International Lead and Zinc Study Group said. While worldwide zinc consumption rose 5.7 percent year on year in January, mine production was up 15 percent and metal production up 5.7 percent in the same period.
New lead mines should keep the global lead concentrate market well-supplied, but the market will probably stay tight as there is limited available smelting capacity to turn the concentrate into metal. A majority of the world’s lead smelters - and most of the spare capacity - is in China, but that country’s export taxes discourage use of that capacity to smelt metal and sell it overseas. China imports lead concentrates to feed its smelters and exports the refined metal to world markets. If its exports volumes fell that would alter the world market dramatically.
Australian miner Perilya and CBH Resources decided to merge to create a globally significant zinc and lead producer. The friendly deal would lead to major efficiencies at their operations in the Broken Hill area, in the Australian state of New South Wales. The merged company would produce 220,000 tons of zinc and 100,000 tons of lead each year.

In London, the Copper settlement price was US$ 8,520 a ton with a backwardation of US$ 110 on March 31, 2008.
In Chile, Codelco Norte, the biggest division of Codelco, the world’s largest copper producer, expects output this year to fall by 6.3 percent to 840,000 tons, due to lower ore grades. Codelco produced a total of 1.665 million tons of copper last year and its chief executive said prices for the red metal would remain high due to continued strong demand from China.
Jiangxi Copper, China’s second largest copper producer by output, said China would require more copper supplies as the country recovered from severe snowstorms. The company, which expects to produce 700,000 tons of refined copper this year, said prices would stay high due to an unstable global supply/demand balance.
PT Newmont Nusa Tenggara, expects copper and gold production at its Batu Hijau mine on Sumbawa Island to fall 40 percent this year from last year. Lower output is expected because the company this year is mining in an area that is less rich in mineral resources. Copper output is expected to fall to 300 million pounds from 500 million pounds last year and gold to 300,000 ounces from 500,000 ounces in 2007.

In London, the tin settlement price was US$ 20,525 per ton with a contango of US$ 50 on March 31, 2008. Tin prices on the LME rose to new record highs before giving back their gains as hedge funds cut their exposure to commodity asset classes. Supply concerns were a large driving force behind tin, the market is tight at the moment at 9,500 tons.
In Indonesia, PT Koba Tin was allowed to resume operations on March 14 after it was ordered to stop producing in late January over allegations that it had received tin ore from miners who mined illegally.
China’s Yunnan Tin Company, a major tin producer, plans to raise its refined tin output by 15 percent in 2008 from an estimated 61,129 tons produced in 2007.
Syrymbet Mining, part of the Almaty-based Lancaster Group, is to develop a large- scale tin project in northern Kazakstan, starting with a two-year large scale pilot plan operation later this year. The orebody could eventually support a 7,000 tons per year tin mine, using chlorine leaching to extract tin and several co-products. Proven and probable reserves are 11 million tons grading 0.9 percent tin (98,500 tons contained tin).

In London, the Gold AM fixing was US$ 937.25 per ounce and spot Silver traded at US$ 17.99 per ounce on March 31, 2008.
Safe haven buying and the US dollar weakness helped pushed gold to a record US$ 1,030.80 an ounce. Profit taking subsequently dragged the yellow metal lower. Reports are emerging that gold’s fall was seen as a buying opportunity for some jewellers and investors in Asia.
Coeur d’Alene Mines expects to produce around 16 million ounces of silver in 2008, a 40 percent increase over 2007 output of 11.5 million ounces. The company’s San Bartolome mine in Bolivia has begun pre-commissioning activities, with the processing of ore expected to begin by the end of March. San Bartolome is expected to produce 6 million ounces of silver in 2008, with full-year 2009 production forecast at around 9 million ounces.
AngloGold Ashanti expects to produce 4.8 million ounces to 5 million ounces of gold in 2008 following the power rationing in South Africa, assuming that the company can receive 90 percent of its power supply needs. AngloGold produced 5.5 million ounces of gold in 2007.

In London, Nickel traded at US$ 29,805 per ton, equivalent to US$ 13.52 per pound on March 31, 2008. Cobalt min. 99.8% traded at US$ 51.25 per pound and Cobalt min. 99.3% at US$ 48.625 per pound on March 28, 2008.
Cobalt shot to a 30-year high of US$ 52.25 an ounce helped by demand from the battery industry and disruptions in Democratic Republic of Congo. Global cobalt prices are rising with concerns of a prolonged supply squeeze from DRC, the world’s largest cobalt producer, where the government is in the middle of renegotiating 61 mining contracts.
China’s nickel output is expected to rise 17 percent to 250,000 tons this year, mainly as response by key producers to strong demand from the stainless steel industry, according to Antaike, the state-run metals information provider. About 70 percent of global nickel production is used in stainless steel.
PT International Nickel Indonesia, or Inco, expects its nickel output to rise to 77,000-79,000 tons in 2008, exceeding its previous record of 76,675 tons set last year a senior company official said.