The turmoil witnessed in the world’s financial system has now spread to the real economy, with levels of economic activity falling sharply in the world’s mature and developing economies alike.
 Many of the world’s mature economies including the US, the UK, Germany and Japan have slid into recession and it is only a matter of time before more join them. The consequent fall off in demand is feeding through to the manufacturing sectors of the developing world, particularly in Asia, and even the Chinese economic powerhouse has been forced to slow.
According to the latest Purchasing Managers’ Indices (PMI) manufacturing activity in November fell to record lows in many of the major economies, including Japan, the UK, Germany and China. Meanwhile in the US, manufacturing activity declined to its lowest level since 1982 and in India, activity declined for the first time in three and a half years. Elsewhere, in the auto sector, car manufacturers globally are cutting production in response to collapsing consumer demand, especially in Europe where sales plunged by a massive 25% year on year in November.
In the US, sales of newly built single-family homes fell 2.9% in November to the weakest level since 1991. Sales of US existing homes fell 8.6% with house prices down 13.2% from a year earlier. In the US, The scale of the deceleration of economic activity prompted the Federal Reserve to take the unprecedented step of cutting US interest rates to close to zero. The Fed also signalled its intention to try to stimulate the economy by effectively printing money. The move prompted the dollar to fall against the major currencies. In China, The People’s Bank of China cut its one-year lending rate by 27bps to 5.31% and its deposit rate by the same amount to 2.25%.
The reserve requirement will go down to 15.5% for large banks and to 13.5% for smaller ones effective on December 25. The Chinese government also plans to go on a massive base metals buying spree to feed its stockpile and rescue local producers as physical buying all but grinds to a halt in the market.This includes 150,000 tonnes of copper, 300,000 tonnes of aluminium, 150,000 tonnes of lead and 300,000 tonnes of zinc. US Vice President elect Joe Biden said the incoming US administration is nearing agreement with Congressional Democrats on huge emergency spending bill intended to create 3 million jobs over the next 2 years.
ECB President Trichet said markets were underestimating the impact of central banks’ and government response to the financial crisis. He urged European countries that still have budgetary room for manoeuvre to use it to stimulate growth. Germany edged closer to a 2nd package of stimulus measures worth $35 billion.

In London, the Lead cash settlement price dropped to US$ 949 per tonne while the Zinc cash settlement price was US$ 1,120.50 per tonne on December 31, 2008.
LME lead stocks were of 45,150 tonnes while LME zinc stocks rose by 32% to 253,475 tonnes. Mines continued to cut production in response to distressingly low metal prices, increasing the 2009 production losses to 794,000 tonnes of zinc. In the US, Teck has temporarily closed its Pend Oreille mine, while East Tennessee Mines 50,000 tonnes of zinc per year have been placed on care and maintenance.
In Australia, Xstrata cut ore production by 20% at its McArthur River lead-zinc mine, resulting in an output reduction of 31,700 tonnes of zinc and 7,200 tonnes of lead. Similarly, five smelters have announced output reductions, increasing the 2009 production losses to 780,000 tonnes. In Korea, Korea Zinc and the Yong Poon Group have announced production cuts of 10% at Onsan and Sukpo smelters, starting in December 2008 for thirteen months.
In the US, Nyrstar will cut production at its 124,000 tonnes per year Clarksville smelter for 6 months by up to 40% from early January 2009. In Northern Europe, Boliden will cut zinc production by 60,000 tonnes per year at its Finnish and Norwegian smelters. Nordenham smelter is expected to cut production soon, mainly due to weak demand for zinc metal.

In London, the Copper settlement price further collapsed, hitting a four-year low of US$ 2,902 a tonne with a contango of US$ 33 on December 31, 2008.
2008 has proved to be one of the most volatile year on record in terms of price movement. Prices were led lower during December by a further deterioration in global economic activity and its perceived knock on effect on copper demand. Copper mine production cuts and project deferrals continued to emerge during December as copper demand drifts and low metal prices erode margins.
China’s Yunnan Province plans to buy up to 1million tonne of base metals to support local smelters. In the US mostly, Freeport McMoRan has announced production cuts of 90,000 tonnes in 2009 and of a further 225,000 tonnes in 2010. Elsewhere Mine closures include Baluba (25,000 tonnes per year) in Zambia, Dukulushi (20,000 tonnes per year) in DRC, Eloise (15,000 tonnes per year) in Australia, Montecristo (20,000 tonnes per year) in Chile, Troy (4,000 tonnes per year) in the USA and Kapan (3,000 tonnes per year) in Armenia.
In Chile, Codelco has announced that it will forge ahead with its expansion program at its new Gabriela Mistral SxEw mine. The mine is expected to raise output from 150,000 tonnes per year to 165,000 tonnes per year starting in late 2009, and has a life expectancy of 15 years. Eventually, LME stocks rose by 16.5% this month to 339,775 tonnes, their highest level since early 2004.

In London, the tin settlement price collapsed to US$ 10,355 per tonne with a backwardation of US$ 250 on December 31, 2008.
In Yunnan, China's top tin producer, Yunnan Tin, has stopped production at its smelting facility due to low prices, despite a plan by the Yunnan provincial government to support smelters by buying metals. The company's sole smelting facility in Yunnan province had the ability to produce 70,000 tonnes of tin a year and this year's output would be around 60,000 tonnes. In Indonesia, the trade ministry has issued one more tin export licence, bringing the total number of licensed companies to 23. Meanwhile the country’s parliament has ratified the new mining law.
Over a five year period, producers will be required to produce refined metal in Indonesia, rather than exporting concentrates. The new law will also abolish contracts of work under which foreign mining companies operate in Indonesia, although existing contracts will be honoured. The only COW existing in tin is that for PT Koba Tin, which continues to 2013. The ministry approved the export licence on December 3 for PT Eunindo Usaha Mandiri, which has a smelter on Riau Island, off Sumatra.
Most independent smelters are currently closed, although some will re-open in January. Global tin destocking has accelerated and there has been a real fall in consumption in the fourth quarter of this year, especially in solders and tin chemicals. LME stocks are still very low, they nonetheless rose by 72% to 7,790 tonnes.

In London, the Gold AM fixing rebounded to US$ 865 per ounce and spot Silver traded at US$ 10.79 per ounce, on December 31, 2008.
Gold enjoyed a late rally on the back of a weaker dollar (and talks of printing money), in sterling and some other currencies it is now at an all-time high. However, the price remains tremendously volatile with the market unsure whether we will get deflation or inflation first. In the US, ProFunds Group launched the first exchange-traded funds to provide short or leveraged exposure to gold or silver.
In Mexico, Silver Eagle Mines Inc has decided to close its Miguel Auza mine due to low silver prices. Meanwhile, due to a strike, production halted at Mexico’s Fresnillo operation, the world’s largest silver mine. The mine is a subsidiary of Peñoles and produced 33 million ounces in 2007. In northeastern Colombia, Greystar Resources Ltd has updated the resource estimate at its Angostura gold-silver project, increasing the measured and indicated resources by almost 14%.
Indian gold imports were between 35 tonnes to 40 tonnes in November, compared with 54 tonnes in the same month of 2007, according to the Bombay Bullion Association, which blamed high prices for the drop.

In London, Nickel traded at US$ 10,810 per tonne, with a Contango of US$ 115, on December 31, 2008. Cobalt min. 99.8% traded at US$ 17.5 per pound and Cobalt min. 99.3% at US$ 13 per pound on December 19, 2008.
This month’s news is again dominated by the announcements of further mines closures. In Tasmania, Australia, Oz Minerals Ltd has decided to close its small but ultra-rich Avebury nickel mine, the latest cutback by one of Australia's biggest mining houses. In Canada, Brazil's Vale, the world's largest iron-ore mining company revealed a series of planned closures and delays in its nickel operations.
Similarly, in Sudbury, Ontario, Vale will shut its Copper Cliff South mine producing 8,000 tonnes per year of finished nickel, in January “for an undetermined period of time”. In Finland, Belvedere Resources Ltd. has placed its Hitura and Sarkiniemi nickel mines on care and maintenance until further notice. In Bostwana, the world's top nickel producer, Norilsk Nickel, had to suspend for 12 days its Tati Nickel mine and concentrator due to a furnace breakdown at a smelter that processes its concentrate at a rate of 20,000 tonnes per year. In Democratic Republic of Congo, cobalt producer CMSK has temporarily suspended operations at Luiswishi mine. In 2007, CMSK produced 4,000 tonnes of cobalt contained in concentrates. LME stocks rose again and are still at a nine-year high with 78,390 tonnes.