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Where to Now for Metals? A Look at Gold, Copper, Aluminum and Steel

We know that 2011 began with a rocky start – the Middle East uprisings in Egypt, Tunisia and Libya turned the status quo upside down, the sovereign debt of European nations such as Portugal, Ireland and Greece continues to stoke concerns, and the Japanese earthquake and tsunami in early March caused immense devastation and spawned global supply chain havoc, not to mention the huge debates on the future of nuclear energy

So where will the year go for specific metals? We took a survey of stories by metal to try and figure out what’s important and why:

Aluminum: Output’s up in China and US while prices stay afloat

According to Reuters, China’s daily aluminum production was up 12 percent in February compared to the year before. An official of the China Nonferrous Metals Industry Association also said earlier in March that China will continue to see an aluminum surplus in the next five years – production will likely rise 24 percent in 2011 to 25 million tons. Meanwhile, the Aluminum Association reported that US production rose 10.5 percent last month compared to March of last year, and was up 4.8 percent from February’s annual production rate.

Why this is important: Although output looks to continue rising, prices should remain steady – or even increase — because of Middle East concerns and worries about power supply in China. (Prices were up to $2720 by April 11, the highest since August 2008.)

Copper: Will China’s demand pullback affect Dr. Copper?

Key developments in the copper world over the last month or so included a number of moves by BHP Billiton (approving a $554 million investment at the world’s No. 1 copper mine in Chile to improve access to better ore grades, and intending to expand Australia’s Olympic Dam mine), according to Reuters.

Why this is important: The International Copper Study Group (ICSG) said at the end of March that “annual copper mine production capacity is expected to reach 24.1 million tons in 2014, rising at an average rate of 4.9 percent a year in the 2011 to 2014 period.” So even though the short term demand in China looks uncertain, there is plenty of room for growth in the years to come. Prices should continue to be strong.

Steel: Apparent demand on the up and up

The World Steel Association is rather bullish on global steel demand in the next few years. According to Xinhua, the association says a record demand of 1.4 billion tons will hit in 2012, and its short-range outlook indicated increases in steel use by around 6 percent for both this year and next.

Why this is important: Steel prices may continue their upward momentum after down years after the crash in 2008, especially if the US housing market improves to augment Chinese consumption of the metal.

Gold: $1500 bucks an ounce??

Yep, the benchmark is here.

Why this is important: Stock markets are down all over the world, and S&P just downgraded the US’ debt rating, pushing gold higher – if anything, gold’s activity serves as the counterpoint to where industrial commodities could be going. (It may not be pretty, but at least it may be able to tell us something.)

And finally, Silver: Quote of the Week

Perhaps just as astounding as gold’s rise is silver’s meteoric increase. At the CME Group Gold and Silver Dinner, Guy Adami, well known as the original Fast Money Five on CNBC, made it known that anyone betting against gold or silver in this extremely bullish market would lose out big time. He started off his keynote with this: “Anyone who is short silver is going to get their face ripped off.”

Why this is important: Silver futures are trading at higher numbers (pushing 81,000 contracts the other day) than ever before, causing quite a stir in the investment community. Also, we must look to inflation control measures to see where metals positions may end up.

By. Taras Berezowsky

MetalMiner is the largest metals-related media site in the US according to third party ranking sites. With a preemptive global perspective on the issues, trends, strategies, and trade policies that will impact how you source and/or trade metals and related metals services, MetalMiner provides unique insight, analysis, and tools for buyers, purchasing professionals, and everyone else for whom metals and their related markets matter.

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