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For base metals, the short-term price scenario looks very bleak
Deepak Singh Tanwar
The fallout of the south-east Asian crisis has been more severe than what has already been predicted. Take, for instance, the case of base metals like copper, aluminium, zinc, lead, nickel and tin-all of which have different applications. But the metals seem to have a common bond which is guiding prices. They are testing new lows every week. Last week, copper touched a four-an-a-half year low. Aluminium touched a 16-month low. Zinc was also available around its 15-month lows. Tin and lead remained depressed.Rising stocks at the London Metal Exchange (LME) have become a familiar trend, which is driving prices southward. All this has prompted the metals trading fraternity to ask: how long will the downtrend prevail? A short-term recovery is possible if there is an understanding between manufacturers for a cutback in production. This is most likely as several base-metal plants will become unviable with a further fall in prices. However, while this could be the short-term answer, a real recovery would dependon a revival of the Asian economies. COPPER: The Sumitomo episode has had a severe impact on copper and, in fact, resulted in a shift towards other base metals. Aluminium recorded the highest turnover at the LME in 1997, which, incidentally, was the highest in the last five decades, thanks largely to the aversion to copper. A dip in copper prices was the other side-effect of the Sumitomo imbroglio. Copper has lost almost 40 per cent since June 1997-rising stock levels on the LME coupled with slower demand being the prime reasons. And prices are close to production costs, making several production facilities unviable. With gold prices ruling close to their 18-year lows, copper's advantage of having gold as its byproduct has also been lost. In western countries, byproducts account for almost 30-40 per cent of copper companies' revenues. Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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