Plans by the Federal Reserve to buy $300 billion of US government debt triggered the stampede into commodities markets, which had been suffering sharp price falls on worries that the world was heading for a depression. For the first time in almost a year, traders looked to oil and other raw materials as a hedge against an unexpected jump in prices. Therefore hopes of a rebounding demand helped drive the benchmark US oil price above $50 a barrel to its highest since the start of December, while copper climbed above $4,000 a tonne for the first time in four months. In the US indeed, some positive data were released. New orders for durable goods increased by 3.4% month-on-month in February, following six consecutive months of declines. Machinery was the biggest mover, up 13.5%. New home sales also rose in February, up by 4.7% month-on-month. However, several economic news continue to cloud the base metals spectrum, suggesting sentiment is running ahead of reality. Unnerving to the market was a statement by a federal official that bankruptcy may be the best option for GM and Chrysler. Besides, the CEO of GM, Rick Wagoner resigned as requested by the Obama administration. In other bailout news, Treasury Secretary Geittner admitted that some banks will still need “large amounts” of assistance to keep operating. Adding to the negative picture, Japan’s industrial production fell for the fifth straight month in February. Similarly, Euro-zone industrial production is contracting at an extremely rapid rate in early 2009, with January’s data pointing to a 17.3% year-on-year decline. Global car production was down an astonishing 42% year-on-year in December 2008 and January 2009. The transport sector is a major end-use market for steel, aluminium, and zinc in particular, and these markets have been very hard-hit in the current downturn. At this stage in the global economic crisis, it is worth highlighting the prominent role of China who is restocking at a high pace. Their restocking is partly speculative, partly for strategic reasons and partly to support the local industry. China announced $22 billion of investments in mining companies and may also spend more than $500 billion on overseas resources investments over the next eight years to secure supplies to drive economic growth. China cannot be expected to be the world’s economy saviour, yet it has been solely responsible for the recent metals rally, and lately not by just SRB re-stocking and other mechanisms that have merely moved surplus metal from one location to the next. However, the market has been buoyed by the three consecutive rises in China’s manufacturing PMI, which is a good proxy for base metals’ demand, and China’s intention to throw whatever it takes to reach its target growth rate of 8% in 2009.

In London, the Lead cash settlement price rose to US$ 1,272 per tonne while the Zinc cash settlement price rose to US$ 1,300.5 per tonne on March 31, 2009.
Zinc prices are momentarily being propped up, mainly thanks to China, with the SRB buying 100,000 tonnes of refined zinc in late February and looking to secure another 100,000 tonnes. Moreover, the higher domestic Chinese price over the LME price has also fuelled the arbitrage trade, and as a result refined zinc imports have been climbing these last months. However, zinc’s demand-side fundamentals remain fragile, with galvanized steel still in the grips of recession. Similarly, the lead replacement battery demand is declining, which could weaken lead price.
In China, the Shaanxi government has reported plans to buy 44,000 tonnes of zinc and 53,000 tonnes of lead from local smelters. Besides, some lead smelters indicated they would increase output in anticipation of a rise in price on tight domestic supply. However, Zhuzhou Smelter, China’s largest zinc producer, posted a 76% drop in net profit in 2008. In Brazil, Votorantim expects to complete Cajamarquilla zinc refinery expansion in Peru by the end of 2009, which would double capacity from 160,000 to 320,000 tonnes of zinc metal per year.
In Peru, Doe Run halted work at its La Oroya smelter after banks reportedly cut credit lines for the company. LME Lead stocks totalled 61,625 tonnes while zinc stocks dropped to 344,450 tonnes.

In London, the Copper settlement price rose by 16% to US$ 4,035 a tonne with a contango of US$ 16 on March 31, 2009.
The key drivers behind copper prices rally in recent weeks have been the much-reported buying by the Chinese State Reserves Bureau (SRB) and the tightness in availability of scrap and secondary material in recent months. When combined with the SRB stockpile buying, the drop in scrap availability is contributing to a surge in Chinese imports of refined copper, which totalled over 400,000 tonnes in the first two months of this year, up from 264,000 tonnes in the first two months of last year. However, much of the refined imports can be explained by the trade exploiting the price differential between the Shanghai copper price and prevalent LME copper price, which has encouraged cheaper metal from abroad into China. Real demand has played little part in the copper price rebound and remains notably weak as global manufacturing activity continues to decline.
Anyway, it is also suggested that the SRB will buy a further 300,000-600,000 tonnes during the remainder of year. However, given that prices have now rallied to the $4,000 per tonne mark, it is questionable whether we will see further SRB buying activity at least in the short term, effectively removing a key source of support for prices. Many smelters are forced to curb their copper output and to slash acid sulphuric prices due to sulphuric acid storage problems.
In China, Ningbo Jintian Group has halved its copper output to 7,500 tonnes per month, due to low scrap availability. Similarly in Japan, Pan Pacific Copper is slashing its Q2 by 5,100 tonnes while Mitsubishi Materials stated that they would maintain output at lower levels for several more months. However in DRC, Freeport-McMoRan, has just produced its first copper cathode at the giant Tenke Fungurume copper cobalt mine, with initial production targets of an annualised 115,000 tonnes of copper. LME copper stocks dropped to 501,775 tonnes.

In London, the tin settlement price was US$ 10,450 per tonne with a backwardation of US$ 200 on March 31, 2009. The market remains range bound, but is looking vulnerable, especially with stocks rising.
In addition, the boost in sentiment that the other metals are receiving from government infrastructure spending plans does not apply to tin as it is not an infrastructure metal, and overall its demand side outlook is concerning. The only positive from the demand-side is the tinplate sector, which has continued to fare well as people hunker down and buy cheaper foods, while electronics demand, where tin is used as a lead-free solder has deteriorated as the global downturn squeezes sales of electrical goods.
However, for now at least the backwardation between the cash and forward tin prices has brought metal into LME warehouses and eased near-term tightness, although by early March metal had begun flowing out from Malaysia and Singapore. In Indonesia, refined tin exports were 8,534 tonnes in February, according to the trade ministry, up 15% year-on-year. The government expects tin production to rise 47% year-on-year, to 105,000 tonnes in 2009, despite efforts to cap output at 100,000 tonnes.
In china, the Hunan city of Chenzhou plans to buy 5,000 tonnes of tin. In South Korea, 200 tonnes of tin ingot were bought at a premium of $245 per tonne for shipping on 10th April to the port of Incheon. LME stocks have increased by 19 % to 10,905 tonnes.

In London, the Gold AM fixing declined to US$ 918.50 per ounce and spot Silver slightly dropped to US$ 13.11 per ounce, on March 31, 2009.
Gold’s tremendous February surge higher on frantic investment demand has now stalled, and the physical market is now beginning to drag. Usually such markets adjust to higher prices after a while, but with the economic climate as it is, this might take longer than usual. Consumers in India and many parts of the Middle East are being as badly hit by the recession as anywhere. Investment has been and is likely to remain the key to higher prices, and while the financial chaos should ensure it is well supported, a short-term plunge is likely if the focus turns to deflationary economies, not collapsing banks.
However, on a longer-term basis, the negative outlook for the USD and rising inflationary expectations should be supportive for the price to trend higher and attain new highs. Regarding Silver, its symbiotic relationship with gold will ensure that it will stick closely to the pattern set by the more expensive precious metal. Peñoles, the Mexican silver and gold producer, is to refine metal in South Korea due to a strike at its main processing plant. It said if the strike continues it also plans to use facilities in South America, Europe and Canada.
In India, there was no gold imported during February, according to the Bombay Bullion Association. The country imported just 1.9 tonnes in January, against 23 tonnes in the same month of 2008.

In London, Nickel traded at US$ 9,405 per tonne, with a Contango of $ 120, on March 31, 2009. Cobalt min. 99.8% traded at US$ 15.00 per pound and Cobalt min. 99.3% at US$ 13.00 per pound on March 27, 2009. As for some other metals, the nickel price has improved slightly on reports of re-stocking by the SRB. But Nickel’s fate is tied closely to that of stainless steel, which appears to be down and out for the foreseeable future as steel in most forms tends to over-exaggerate economic cycles.
Despite an estimated 17% of nickel mine output having been cut in 2009, there are still a number of new projects or mine expansions scheduled for 2009. More than 88,000 tonnes of new mined nickel supply is estimated to come on-stream this year, which sounds substantial but when measured against production cuts made to date actually translates to a net decline in mined nickel production of about 160,000 tonnes, or 11% of total mined nickel output in 2008.
In China, the State Reserves Bureau plans to buy up to 20,000 tonnes of refined nickel from local smelters. In Russia, 14,000 tonnes of nickel were exported in January, down 38.3% year-on-year. In Indonesia, the state-owned miner PT Antam plans to produce 12,000 tonnes of ferronickel in 2009, down from 17,566 tonnes in 2008, while Rio Tinto reiterated its commitment to a $2billion nickel project on the island of Sulawesi. LME stocks slightly rose to 107,682 tonnes, their highest level since early June 1995.