Were said in the latest issue of its Commodities Focus research report that the last time the annual offtake of the major base metals fell simultaneously was in the post-oil shock recession of the early 1980s.The fundamental outlook for metals into 1999 remained "very weak indeed", Were said.

"We envisage a year of flat and disappointing prices foremost metals."Zinc still had the potential to out-perform during the period and remained the preferred base metal over the next 12 months, it said. "Even with zinc, however, Chinese sales are likely to cap any price rallies."

On aluminium, the medium term outlook had weakened with a sharper than expected deterioration in Asian consumption, notably in Japan.

A steep buildup in Japanese merchant stocks and a modest rise in producer stocks had offset a sharp fall in LME inventories, it said. "We believe that the aluminium marketwill remain in surplus both this year and next," it said.

The broker has slightly reduced its aluminium price forecasts for the period 1998-2000 to 62 US cents a pound for fiscal 1998-99 from its previous forecast of 65 cents and from the 1997-98 average price of 69 cents. Prices in fiscal 1999-2000 are forecast to rise to 66 cents and on to 73 cents in 2000-01. On copper, Were said it now expected a 0.4 percent contraction in offtake this year.

With an expected contraction in supply, it forecast a surplus of more than 300,000 tonnes for calendar 1998 and a smaller surplus of just under 200,000 tonnes in 1999.

The broker has edged down its average price forecasts to 77 US cents/lb for 1998-99 but has held its price forecast of 83 cents for 1999-00 steady."Price-related production cuts...will be sufficient to rebalance the market in 2000, with a steady improvement in annual average prices from that time," Were said.

The broker expects the nickel market to remain in surplus in 1999, with pricessubdued.

From 2000 it expects a return to deficit, with steady price improvements after that.

Melbourne-based Were has cut its forecast nickel prices to 211 US cents/lb for 1998-99 from its previous forecast of 248 cents and to 254 cents in 1999-2000 before an upturn to 304 cents in 2000-01.

Zinc prices had been depressed by fund selling but further stock falls in the fourth quarter would support a reduction by funds in short positions, facilitating a modest price recovery in the fourth quarter of 1998, Were said.

The broker has cut its forecast zinc price for 1998-99 to 52 US cents/lb from its previous forecast of 54 cents. It sees prices falling in an over-supplied market to 51 cents in 1999-2000, 49 cents in 2000-01 before turning up to 50 cents in 2001-02.