Aluminum: After months of relative price stability, aluminum activity increased in the first quarter. Prices were trading at 21-month highs over weather-related concerns that energy shortages in South Africa and China would curtail primary production. In the short to medium term, the combination of supply disruptions, high energy prices, and a significant interest by funds to diversify into commodities suggests that there may be room for prices to trend higher in the months ahead, offsetting a domestic market that is showing little end-use strength. At ISRI’s April convention, speakers forecast LME cash aluminum to average $1.26 a pound this year, compared with last year’s $1.20-a-pound average. 

Copper: Copper’s second quarter looks especially firm to several commodity and industry analysts. As many now see it, global refined copper supply appears less than secure due to ongoing supply-side issues that are resulting in inventories returning to all-time lows and prices potentially establishing all-time highs, propelling scrap values as well. LME copper traded at a record $8,820 a mt in March, and LME copper inventories were down 40 percent as the second quarter got underway. Recent forecasts for a second-quarter LME cash average range from $3.50 to $4.00 a pound based on copper’s global fundamentals along with hedge funds adding to their respective long positions.  

Iron and Steel: The domestic steel industry is struggling with low imports, low inventories, extended lead times, higher input costs (for coke, coal, iron ore, scrap, energy, and transportation) and a weak dollar that has lifted exports of scrap and finished steel over the first quarter. Analysts expect this trend to continue well past mid-year, despite concerns about relatively weak domestic demand. April’s benchmark hot-rolled coil prices were up more than 50 percent since the start of the year, and independent sources are calling for another 29-percent increase in the second quarter. IISI is forecasting that 2008 will be another strong year for the global steel industry, lead again by the BRIC countries of Brazil, Russia, India and China. IISI expects those countries’ production to increase 11 percent this years and 10 percent in 2009.

Lead: The global picture for lead suggests that the 2008 market will remain in deficit. In fact, some analysts believe that last year’s shortfall was much greater than ILZSG initially reported because of lower than- expected Chinese production, Australian mine production supply disruptions, and relatively high lead prices that inhibited imports of lead concentrates. Forecasts that Metal Bulletin Research offered at ISRI’s convention placed the LME at an average of $1.10 a pound this year, with the caveat that China’s tax policy and its subsequent effect on lead exports to the West will have a major influence on prices. 

Nickel and Stainless: Nickel’s familiar volatility was apparent in the first quarter of the year, spurred on by a well-publicized mine strike in Columbia and improved consumption prospects from the stainless steel sector. Combined, these forces propelled LME cash above the $15-a-pound mark in March. Looking ahead, however, several analysts have concluded that the global nickel market is trending toward a modest surplus and that nickel stocks will remain relatively high. A recent CRU Group (London) forecast placed LME cash nickel at an average of $13.91 a pound in 2008, with next year’s potential range of $14.80 to $18 a pound before a growing supply surplus forces prices “sharply” lower by 2010.

Paper and Recovered Fiber: The North American market for NBSK remains in a holding pattern in the second quarter, with list prices pegged at $880 a mt--unchanged since last December, but at a decade plus high. Some are suggesting, however, that in the months ahead, new pulp supply will trend higher than projected demand, potentially eroding prices over the second half of the year. Meanwhile, at the start of the second quarter, scrap paper has backed off domestically and, especially, for offshore customers in Asia, due in large measure to a lack of exports containers. Even so, analysts predict another record year of exports, meaning that offshore demand will remain an important price driver.

Zinc: The global picture for zinc remains essentially unchanged from the broad outline the March/April Marketrends column offered. LME zinc values firmed over the course of the first quarter, with the three-month contract averaging $1.11 a pound, but the price is well below what the market experienced in 2007. As it will in the lead market, China will remain a wild card influencing this year’s overall zinc supply/demand balance. A consensus of market participants and analysts expects to see a relatively small zinc surplus emerging this year, with prices averaging close to what they were in the first quarter.