Global base metal prices showed widespread strength in the first quarter of 2008, despite prospects of a US recession, slow growth in world economies and turbulence in the world's financial markets. The weakness of the US dollar and rising inflation expectations were key factors in driving prices higher, as investors increasingly viewed commodities as a safe haven. Price rises were also a reflection of concerns over supply and the relatively low level of stocks, at a time when China's demand remained strong. Technical disruptions, particularly power shortages, and escalating production costs were also impeding supply growth across many base metal markets.

However, according to the Economist Intelligence Unit, the downturn in the US economy over the course of this year may have a negative impact on base metal prices. The fact that the American recession will be consumer driven may have a disproportionately large impact on demand for certain base metals used in the construction and, to a lesser extent, the auto industries.

Nickel prices reached record levels in 2007, peaking near US $25 per pound in May, but ended the year around $12.  Prices are expected to remain in the US $12 to $14 range for 2008 as a result of expanding stockpiles and lagging demand resulting from declining growth in the United States housing market.  This range is approximately 20 percent below last year's average of US $16.55 per pound. The projected nickel descent may lead an overall decline in industrial metals for the year, with demand diminishing for zinc and tin. 

Copper may not be as seriously affected as demand from China, the world’s largest copper consumer, remains strong. Copper prices also have reasonable growth prospects over the next few years, due to the lack of exploration success and secular demand growth from China. Most industry analysts concur that the copper price is likely to remain above US$3.00 per pound through to 2010, with a long term copper price of US$2.00 per pound (Source: Pan Australian Resources Ltd.).  In April, Credit Suisse raised its 2008 copper price forecast to $4 per pound from $3.60 and noted that the Codelco strike in Chile appeared to be escalating and could spike the prices of copper above its near-term forecasts.  Codelco, the world’s largest copper producer, reported that the strike has already cost the company 19,000 tonnes in lost copper production, or about $100 million in financial losses. The strike alone has helped keep global copper prices near record highs of about $4 per pound.

Zinc prices showed a steady decline in 2007 and are projected to continue this trend in the near term, given the significant supply expected from Western producers in 2008. However, China's growing zinc concentrates for their underutilized smelters will provide support for the metal in the long term. Analysts project zinc to trade between $1.00 and $1.15 per pound in 2008 and around $0.90 in 2009.

Over the next several years, aluminium prices are expected to outperform other base metals as demand exceeds supply. Aluminium smelting is one of the most energy-intensive industrial processes, making the metal especially sensitive to rising global energy costs.  High energy costs, along with tight bauxite and alumina supplies and a slowdown in aluminium capacity growth from China are expected to lead to lower supply. Aluminium prices are expected to average around US $1.25 per pound in 2008 and $1.20 in 2009.