Base metals ripe for downside corrections

June 19, 2009

USA/After an interview this week for Reuters Investment Summit,  Brian Fabbri, chief U.S. economist at BNP Paribas said he did not think gains in base metal prices over the last 3 months accurately reflect how weak fundamentals are, especially in the economies of major users U.S., Europe and Japan, adding that industrial metals prices would need to correct lower.

Asked whether growth in emerging economies would be enough to compensate for slowing in the U.S., he said: “No.”

Fabbri pointed out that emerging economies accounted for only about 25 percent of global growth and would not be sufficient to take up the slack in the sagging U.S. economy.

“Contrary to some people’s thinking at the start of the recession who thought there would be a decoupling of the U.S. from other economies like China that has not been the case,” the economist said.

So while infrastructure spending in countries like China might lift metals demand, its growth pace will be limited without the support of robust industrial and economic output in developed countries.

Furthermore, while China, India and Brazil may continue to grow during the current global recession, he noted that not all emerging markets are alike, citing faltering economies in Eastern Europe and parts of South America as examples.

Comments

I just read the SMH and it says that the Chinese have found Asia’s biggest iron ore deposit in China’s northeastern province of Liaoning, with reserves of more than 3 billion metric tons. The grade of the ore is between 25 and 62%.This find will certainly release some of the pressure, as it may reduce China’s dependence on imports from Vale, Rio Tinto and BHP Billiton. Another reason for a downside correction I would say.

 

Personally I think silver is getting ready to rock n roll. We will see silver at 50 to 100 dollars an ounze. Lets enjoy the ride silver holders……………

Posted by Debora Edholm | Report as abusive
 

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/