Extending the cycle
Commodity price revisions: positive for copper, iron ore
and coal; negative for zinc
We revisit our supply-demand modelling for the four base metals and iron
ore. While iron ore price settlements for JFY2008e (the Japanese fiscal
year) are underpinned at high levels (up c70%), we believe slowing
Chinese steel- production growth and expanding iron ore supply will
relieve market tightness in H2 2008e and we assume a 10% price
retracement in 2009e. Despite slowing global growth, we think the copper
market will be in modest surplus in 2008, which will maintain speculative
interest and underpin prices at robust levels. Conversely, we have cut zinc
price forecasts as we foresee rising zinc inventories. Coal markets have
spiked on near-term supply issues and we assume contract price rises of
110% and 100% for coking and thermal coal in JFY2008.
Extension of commodity bull run or USD hedge?

Contents

2008 starts with a perfect
storm for commodity prices 3
Zinc – the bear amongst the
metal bulls 5
Copper – resilient 9
Aluminium – Power issues
overplayed 12
Iron Ore – Making hay while
the sun shines 15
HSBC commodities price
forecasts 21
Commodities forward curve 22
Commodities consumption
trends 23
Macro indicators 25
Commodities indices
performance 27
Commodities demand
indicators 29
Aluminium & alumina 30
Copper 37
Zinc 43
Nickel 47
Ferrochrome 51
Lead 54
Steel 58
Stainless steel 67
Bulk commodities 69

Gold 75
PGMs 77
Economic forecasts 82
Appendix 83
Disclosure appendix 89
Disclaimer 91