The price of base metals have declined

Tag : base metals
Mr. Melek  thought the price will be higher because of  the supply became tight. But the immediate problem facing investors is the slowdown in theU.S. economy, which appears to be coinciding with a weaker Europeand Japan. There is also an increased risk that the economies ofBrazil, Russia, India and China, which have been resilient, beginto slow, Mr. Melek said.
Base metals have declined about 3 per cent since late last week."Among the London Metal Exchange metals, zinc plunged just over 12per cent, aluminum 6 per cent and nickel nearly 6 per cent asinvestors booked profits and reduced their risk profiles," Mr.Melek said. "Unlike equities, however, base metal prices are stillup 13 per cent from the start of the year." (The S&P 500 is down 14per cent on a year-to-date basis.)
Zinc and nickel prices have already fallen below their marginalcost of production, which offers "the possibility of a rebound oncesentiment improves," Mr. Melek said.
However, that could be a while based on the weakening capital goodssector of the economy. This week Eaton Corp. warned of asecond-half slowdown "following in the footsteps of RockwellInternational Corp., Oshkosh Truck Corp., United Parcel ServiceInc., General Motors Corp., John Deere Ltd. and others," saidTobias Levkovich, chief equity strategist for Citigroup GlobalCapital Markets Inc.
"Importantly, such companies represent the primary users of rawmaterials," Mr. Levkovich said. "Thus, we see it as just a matterof time before we hear disappointing news from commodity companies,too."