Thus far in 2009, base metal prices have not followed on from the sharp decline in 2008, even though the macroeconomic outlook has persistently darkened in recent months. In the EU, industrial production (IP) fell 2.3% month-on-month in February 2009, and by 18.4% year-on-year. In the US, IP fell to the lowest level since December 1998, to be down 12.8% year-on-year in March. In Russia, IP was reportedly down 14.3% year-on-year in the 1Q09. In China, IP growth came in at 8.3% year-on-year in March, bringing 1Q year-on-year growth to 5.1%, while Chinese GDP growth slowed to 6.1% year-on-year, compared to 6.8% in 4Q08. Global GDP is on track to post a decline of 5.7% annualised in Q1, after a 6.7% annualised decline in Q4 last year. The data accordingly show the global economy firmly mired in recession, but the good news is that the pace of decline is now slowing. Forward looking indicators of economic growth have moved from being sharply disappointing to exhibiting signs of stability, albeit at low levels. For instance, the Euro area manufacturing flash PMI output index for March rose 0.5 points. The ratio of new orders to inventory turned higher for three straight months to March, indicating that the December 2008 month marked the lowest point for this important forward indicator of manufacturing activity, similar to equivalent indicators in the US and Japan, and in most of the emerging economies. Arguably commodity prices, now up around 10% to 15% for the year to date, have begun to respond to this less negative demand environment, although supply adjustments, USD weakness and inflation concerns over the longer term have also played a key role in bidding prices up off their late 2008 - early 2009. Moreover, China’s base metal re-stocking has played a great role in supporting prices so far this year, but will not be sufficient to take up the slack in the West. There, demand for base metals will contract in 2009 and in some cases by double digits. China’s economy in 2009 will only grow by 8%, which will not be enough to soak up metals’ supply, even with current production cuts. The copper price has risen by as much as 48% in 2009, and all but aluminium and nickel have enjoyed double-digit price growth. However, slender signs of stabilisation in the global economy are now at risk of being snuffed out by what might turn out to be the first global health-related pandemic in 40 years. “Swine flu” if it achieves mass global contagion will obviously damage many sectors, including all base and some precious metals. Only gold might benefit, as investors turn to it while all else seems to be failing.

In London, the Lead cash settlement price rose to US$ 1,355 per tonne while the Zinc cash settlement price rose to US$ 1,408 per tonne on April 30, 2009.
Zinc has benefited from SRB re-stocking and resultant high imports exploiting the positive arbitrage. Besides, Hunan Nonferrous Metals Corp. announced plans to spend $176 million over the rest of 2009 on buying metals such as zinc and lead. Lead has been supported by seasonally high replacement battery demand, which is however drawing to a close, and by tight lead concentrate supplies. According to the International Lead and Zinc Study Group (ILZSG), the global zinc market will be in a surplus of more than 260,000 tonnes in 2009, while the global lead market will be in surplus by 37,000 tonnes.
ILZSG also forecasts refined zinc demand to fall by 4.9% in 2009 and refined zinc output to fall by 4%. In Peru, operations at Iscaycruz, one of the largest lead and zinc mine in the country have been suspended. In Japan, the main zinc smelting companies have revealed plans to slash refined metal output in April-September by about 15% year-on-year.
There is also a continued threat of involuntary production cuts stemming from difficulties placing sulphuric acid, all the more as summer in the northern hemisphere is approaching. In Canada, Noranda 280,000 tonnes per year Valleyfield has already been forced to cut production by 20%.
LME Lead stocks rose to 72,325 tonnes while zinc stocks dropped to 328,950 tonnes.

In London, the Copper settlement price rose by 14% to US$ 4,515 a tonne with a backwardation of US$ 24 on April 30, 2009.
Copper is still the base metals bellwether, with its price rising by 34% in Q1 2009, which is one of the largest increases on record for the metal in a single quarter. Imports of refined copper into China have remained exceptionally strong and consequently LME inventories are falling sharply. However, such rally has been based on factors that do not spell long-term recovery, such as China’s State Reserves Bureau restocking, dwindling scrap imports, and the consequential arbitrage trade between the higher Shanghai price and that of the LME. China may be the world’s largest consumer of copper but still only accounts for about one-third of consumption, and US and European copper consumption are expected to decline by more than 10% in 2009.The International Copper Study Group predicts a copper surplus of at least 345,000 tonnes in 2009 growing to around 400,000 tonnes in 2010.
However, a flurry of smelter and refinery have announced cutbacks in response to slow demand for copper and the continued global glut in sulphuric acid. Estimated production losses for 2009 now amount to over 600,000 tonnes, and now exceed losses from mine cutbacks and closures, estimated at just over 500,000 tonnes. In Japan, copper smelters will extend their output cuts to September, with Mitsubishi Materials producing 9.3% less refined copper between April and September, while Sumitomo will maintain its 7% reduction. Similarly, Pan Pacific Copper extended its production cut until September. In Chile, production from the world's biggest copper mine, Escondida, will decline by 30% this fiscal year.
In Canada, Xstrata announced that it will close a copper smelter at its Kidd Creek for at least 8 weeks.
LME copper stocks dropped by 19% to 405,775 tonnes.

In London, the tin settlement price rose by over 18% to US$ 12,560 per tonne with a backwardation of US$ 160 on April 30, 2009.
Tin continues to benefit from lower Chinese production and its net importer status, while the threat of Indonesian output caps and export quotas has effectively capped price falls for much of 2009. Indeed the main supportive feature in the physical tin market is the low level of Chinese production down by 29 % in Q1, plus actual or promised stock financing by provincial governments, although it is not as strong an effect as is being seen in copper and other metals. For now, only Yunnan Tin has reportedly stocked 10,000 tonnes of metal. The main source of weakness has been the surge in exports out of Indonesia since February, with the March volume over 11,000 tonnes.
Indonesian tin production is forecasted to be some 85,000 to 90,000 tonnes this year. However, demand is still weak except for that from the resurgent tinplate sector, which is doing well on increased demand for cheap, canned food products. ITRI’s recent survey of a large number of tin consumers indicates that 2009 will be a very poor year for tin usage, although an end to de-stocking should result in higher purchases in the remainder of the year. In Bolivia, the government is drafting a new mining law which may merge the Vinto tin smelter and Empresa Minera Huanuni, controlling the country’s largest tin mine. In China,Yunnan tin is back to production again after it recent shutdown.
LME stocks have increased by almost 14% to 12,560 tonnes.

In London, the Gold AM fixing declined to US$ 889 per ounce and spot Silver slightly dropped to US$ 12.63 per ounce, on April 30, 2009.
The stabilisation of global economies and financial markets in the past few weeks has seen risk appetite improve to the detriment of gold. Surging equity markets and gains in other asset classes have prompted long liquidation on futures/OTC markets while investors have started to sell shares in the physically-backed ETFs as the need for a safe haven has diminished. Physical buying has returned, lured by lower prices, and this should help to establish a floor over coming weeks. Indeed, jewellery demand is picking up. Indian imports, which were zero in March, reportedly reached 10 tonnes in the first half of the month. Silver might still be overvalued, although the recovery in industrial metals must be having some positive impact on its ‘real value’. In China, four Chinese banks have been given clearance to trade gold futures on the Shanghai Futures Exchange, the first time commercial banks have been allowed to do so. In Russia, the central bank data shows the central bank purchased about 7 tonnes of gold in March, the 24th consecutive month it has increased its reserves. In Zimbabwe, Metallon Gold, the country’s largest gold miner, is in talks to secure a $10 million loan to restart operations at its two largest mines in the country.
The world’s largest silver miner, Fresnillo announced an unexpected rise in Q1 output of 9.1% year-on-year, at 9.2 million ounces. In Mexico, Coeur d’Alene has begun mining silver at its Palmarejo mine. The mine has a capacity of 9 million ounces of silver per year, and should to produce 5.3 million ounces this year.

In London, Nickel rose by 20% to US$ 11,505 per tonne, with a contango of US$ 145, on April 30, 2009. Cobalt min. 99.8% traded at US$ 16 per pound and Cobalt min. 99.3% at US$ 15.50 per pound on April 30, 2009. Nickel price has exhibited a certain amount of “stability” since late-2008, reflecting the fact that plunging demand has been offset by a constant stream of production cut announcements and recently by tightness in scrap availability. In the stainless steel market, reports from the market indicate that scrap availability will fall by more than 20% this year.
However, nickel remains hostage to the weakness in demand for stainless steel and whopping LME stocks, over a month demand compared with over a week of demand in copper. Besides, the industry is operating at a very low rate of utilisation (around 75% compared with over 90% in copper). The International Nickel Study Group is forecasting an 80,000 tonnes market surplus in 2009, with production down 9.4% to 1.26 million tonnes and demand down 8.5% to 1.18 million tonnes. After already cutting 20% of mined output as a proportion of total 2008 production, miners may be faced with making further painful cuts in order to rebalance the market.
In Canada, Vale will shut Sudbury mines and plants for 8 weeks in June and July. In Indonesia, Shanghai Tsingshan scrapped its $500 million nickel pig iron project because the government wanted to take back mining rights. LME stocks slightly rose to 114,204 tonnes, still their highest level since early June 1995.