Commodity Online
Metals prices have fallen more sharply than those during the Great Depression in the 1930s, but the main difference between now and then is governments today have taken fairly swift and, in some respects, well coordinated action by cutting
interest rates, pumping liquidity into capital markets, and rapid response bailout packages, says a report from Fortis Metals Monthly.

The report states that bailout packages might help fend off avoid the worst, but with housing, construction, transport, auto manufacturing and other industrial sectors in trouble there is a sense that this will not be a short sharp recession. None of this news is good for metals (except for perhaps gold), but assets have become cheap and we expect 2009 will see some predatory bids made if the financing can be raised.

Following is a brief on each metal that Fortis Metals Monthly has come out with:

Gold
Gold enjoyed a late rally, and in some currencies such as sterling it is now at an all-time high. The price remains tremendously volatile, reflecting the true uncertainty in the market over whether it is set to join other commodities at
multi-year lows as investors liquidate and demand crumbles, or if fears of inflation down the line will see it make solid gains. We think both could happen.

Silver
Silver has been trading sideways for the best part of November and early December, with a slight tick up on the 9th and 10th December with gold. We may be seeing the beginning of a slight rally.

Platinum
European car sales are still deteriorating; until there is some indication of where they will bottom out platinum will suffer. There is little hope of bargain hunting from broke car companies; only jewellery sales can provide any support. In December, platinum briefly traded below gold for the first time since 1996.

Palladium
China's 10% decline in new car sales in November 2008 sent a shockwave through the palladium autocatalyst industry, as the last leg of support has now broken and the 2003 low of $146.50/oz might now be in sight.

Aluminium
The price has finally crashed to a multi-year low and the demand-side picture looks bleak. A possible 3% growth in demand from China next year will not be enough to offset the contraction in the rest of the world’s economies. More production cuts are likely.

Copper
Copper has only really begun to feel the effects of the global crisis in the past few weeks, its price flirting at sub-$3,000/t levels. Production shedding and restructuring will be necessary over the next few months to avoid further large price falls.

Nickel
The metal seems to be near bottom. Actual and promised production cuts of nickel (as a share of total global production capacity) have been the most of all base metals, and should provide a prop against further price falls.

Lead and Zinc
Huge output cuts have seen zinc break the tide and remain fairly stable only sliding $100/t since mid-November. On the other hand, lead has lost $400/t to trade below $1,000/t over the same period. Zinc is in huge surplus while lead is will be in a mild surplus next year. Zinc’s poor fundamentals have already been priced in, while appalling new car sales data have impacted lead.

Tin
Tin remains the strongest base metal in fundamental supply-demand terms. Even though small smelters will be allowed to restart on the tin producing island of Bangka-Belitung in Indonesia, there is a real possibility that export quotas could be lowered by up to 30,000t. With China still a net importer of tin, this can only be positive for the price.

Steel
The slaughter undergone by steel prices recently seems to be over; announcements from steel producers that they are slashing output has apparently persuaded the market that they mean business about getting supply closer balanced with likely future demand.

Plastics
The mega build-up in Asian and Middle Eastern capacity has helped crush prices. Key areas of demand such as the automobile, construction and packaging industries have been severely affected by the global economic crisis, and right now there is little direction for prices to go but down.

Analysts: Matthew Turner and Carl Firman
Courtesy: Fortis Metals Monthly