"On the basis of our reflation and market fundamental themes, we believe we are entering a period of rising copper prices that should last for two or three years, but followed by prices falling to new lows in real terms," the chairman of Simon Hunt Strategic Services told a mining seminar. "The bad news is that the recovery will not last long. The world economy will weaken around 2002 as the United States goes into recession followed by Western Europe.

Copper markets will deteriorate in tandem," he warned. Behind the expected short-lived rebound will be a reflation cycle over the next two to three years that will increase the cost of goods and services, he said. Also, the global economy is on thecusp of a significant recovery, he said.

In Europe, problems caused by falling exports to Asia, a threat of strikes in Germany, tax proposals by Germany's then finance minister, and a severe winter that brought construction to a halt in some parts of Europe should begin to ease, he said. In addition, he expects the European Central Bank to cut interest rates by at least 50 basis points, accelerating growth through the rest of this year and the next. In Japan, he said economists' forecast of a contraction in the economy this year is a "mistaken call." He said the government and the Bank of Japan are committed to ensuring recovery will take place.

Bank restructuring is almost complete, fiscal policy will continue to expand, and corporate restructuring is almost complete in small- and medium-sized companies almost over, he said. He added that recovery has been seen in its trucking, chemical and electronic industries already. Industrial production in Japan should grow about two percent this year and three to3.5 percent in 2000, he forecast.

In Brazil, there are signs it is on the mend, he said, explaining that Congress is passing important initiatives and interest rates are falling. Brazil could see positive economic growth in the fourth quarter, he added. Emerging Asian countries have entered a post-crisis period, he said. In China, last year GDP grew 7.8 percent and growth this year is likely to come close to that figure, he said.

As for market fundamentals, world refined consumption grew 2.3 percent last year compared with 3.8 percent growth in 1997 and should rise by just over three percent this year and four percent in 2000, Hunt said. Western world production of copper in concentrates rose 5.3 percent in 1998 and capacity will increase by just under four percent this year and four percent next year, he said.

Weak copper prices have forced the closure of 750,000 tonnes of copper spread over the period of 1998 to 2000, he said, predicting that more closures or project postponements will probably occurbecause mining companies and banks have taken a cautious view of the future. "A combination of rising costs of finance and a declining appetite of banks to finance projects will mean that a number of projects will be postponed," he said. "For these reasons, we believe the production of copper in concentrates in the western world will increase by only one percent this year, 2.5 percent next (year) and possibly five percent in 2001." He added that the real issue for smelters throughout the western world is that there is not enough feed -- either concentrates or scrap -- for smelters to meet budget forecasts.

He believes that cathode output in Russia is less than reported officially. China's cathode output in 1998 fell two percent to a previsional estimate of 1.16 million tonnes compared with 1997, he said. It will probably be stck in the 1.1 million to 1.2 million tonne level for the "foreseeable future," he said. Just in case the public was not convinced the copper would recover, Hunt shared an interestedpiece of party trivia. "Every year ending in nine since 1950 has produced a sharp recovery in prices compared with year-earlier values. Will history repeat itself?" he asked.