w: www.basemetals.com | e: info@basemetals.com | t: +44 (0) 1799 516956
Metals off to a quiet but firmer start - awaiting fresh direction

23/03/06

After Tuesday’s mini-spike, Wednesday put in a day of consolidation with stock declines helping to underpin prices, but the market failed to gain upward momentum and most gains had been eroded by the close. Early trading on Thursday morning is attracting some buying with copper back up to $5,120/mt, but overall the market is quiet. Copper prices are now consolidating in a flag formation above $5,100/mt, which suggests a break higher, however, failure to do so soon, runs the risk of prompting disappointed liquidation selling.

In the physical market there is growing evidence that this extended period of high prices is starting to impact physical demand. Although it is easy to think that copper attributes make it too important to be replaced, in reality it isn’t. In Europe, widespread substitution is underway with copper tubes being replaced by plastic tubing and copper conductors are being replaced by aluminium ones and it isn’t just confined to these applications, copper strip, wire and rolled products are also suffering. The danger for the copper industry is that once manufacturers change over to another product, they are unlikely to switch back in a hurry. A classic example of how high prices can lead to demand destruction can be seen in the palladium market, where total demand fell from 9.4moz to 4.8moz between 1999 and 2002, following the sharp rise in prices which move from around $300/oz in 1998 to over $1,000/oz in 2001 and now four years later demand has only recovered to 6.9moz, even with prices back around the $300/oz mark. Although copper is unlikely to suffer to the same degree, it is worth bearing in mind how these high prices may damage demand for quite a few years and we could be in for a period that sees falling demand and rising supply.

However, despite the above, all markets have the ability to ignore the fundamentals for long periods of time so as far as the base metals are concerned the market is still waiting direction and in the absence of any changes to the fundamentals, this means waiting to see what the funds and producers do next.

- ends -

For further information please contact:

William Adams
Metals analyst, BaseMetals.com
press@basemetals.com
http://www.basemetals.com

BaseMetals.com
12 Camomile Street
London EC3A 7PT
UK

T: +44 (0) 20 7929 6339
F: +44 (0) 20 7929 2369

 Live base metals price charts available at www.basemetals.com/freecharts/
BaseMetals.com Disclaimer and Privacy Policy

BaseMetals.com has taken every precaution to provide the most accurate information possible. However it is provided without warranty or claim of reliablity.

PLEASE READ THIS DOCUMENT CAREFULLY BEFORE ACCESSING OR USING THE SITE. BY ACCESSING OR USING THE SITE, YOU AGREE TO BE BOUND BY THE TERMS AND CONDITIONS SET FORTH BELOW. IF YOU DO NOT WISH TO BE BOUND BY THESE TERMS AND CONDITIONS, YOU MAY NOT ACCESS OR USE THE SITE. BASEMETALS.COM MAY MODIFY THIS AGREEMENT FROM TIME TO TIME, AND SUCH MODIFICATIONS SHALL BE EFFECTIVE IMMEDIATELY UPON POSTING OF THE MODIFIED AGREEMENT ON THE SITE. YOU AGREE TO REVIEW THE AGREEMENT PERIODICALLY TO BE AWARE OF SUCH MODIFICATIONS AND YOUR CONTINUED ACCESS OR USE OF THE SITE SHALL BE DEEMED YOUR CONCLUSIVE ACCEPTANCE OF THE MODIFIED AGREEMENT.

It is accepted by the site visitor on the condition that errors or omissions shall not be made the basis for any claim, demand or cause for action. The information and data were obtained from sources believed to be reliable, but we do not guarantee its accuracy.

YOU MAY NOT MODIFY, COPY, REPRODUCE, REPUBLISH, UPLOAD, POST, TRANSMIT, OR DISTRIBUTE, IN ANY MANNER, THE MATERIAL ON THE SITE, INCLUDING TEXT, GRAPHICS, CODE AND/OR SOFTWARE. You may print and download portions of material from the different areas of the Site solely for your own non-commercial use provided that you agree not to change or delete any copyright or proprietary notices from the materials. You agree to grant to BaseMetals.com a non-exclusive, royalty-free, worldwide, perpetual license, with the right to sub-license, to reproduce, distribute, transmit, create derivative works of, publicly display and publicly perform any materials and other information (including, without limitation, ideas contained therein for new or improved products and services) you submit to any public areas of the Site (such as bulletin boards, forums and newsgroups) or by e-mail to BaseMetals.com by all means and in any media now known or hereafter developed. You also grant to BaseMetals.com the right to use your name in connection with the submitted materials and other information as well as in connection with all advertising, marketing and promotional material related thereto. You agree that you shall have no recourse against BaseMetals.com for any alleged or actual infringement or misappropriation of any proprietary right in your communications to BaseMetals.com.

YOU ASSUME TOTAL RESPONSIBILITY AND RISK FOR YOUR USE OF THE SITE AND THE INTERNET. BASEMETALS.COM PROVIDES THE SITE AND RELATED INFORMATION "AS IS" AND DOES NOT MAKE ANY EXPRESS OR IMPLIED WARRANTIES, REPRESENTATIONS OR ENDORSEMENTS WHATSOEVER (INCLUDING WITHOUT LIMITATION WARRANTIES OF TITLE OR NONINFRINGEMENT, OR THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE) WITH REGARD TO THE SERVICE, ANY MERCHANDISE INFORMATION OR SERVICE PROVIDED THROUGH THE SERVICE OR ON THE INTERNET GENERALLY, AND BASEMETALS.COM SHALL NOT BE LIABLE FOR ANY COST OR DAMAGE ARISING EITHER DIRECTLY OR INDIRECTLY FROM ANY SUCH TRANSACTION. IT IS SOLELY YOUR RESPONSIBILITY TO EVALUATE THE ACCURACY, COMPLETENESS AND USEFULNESS OF ALL OPINIONS, ADVICE, SERVICES, MERCHANDISE AND OTHER INFORMATION PROVIDED THROUGH THE SERVICE OR ON THE INTERNET GENERALLY. BASEMETALS.COM DOES NOT WARRANT THAT THE SERVICE WILL BE UNINTERRUPTED OR ERROR-FREE OR THAT DEFECTS IN THE SERVICE WILL BE CORRECTED.

IN NO EVENT WILL BASEMETALS.COM BE LIABLE FOR (I) ANY INCIDENTAL, CONSEQUENTIAL, OR INDIRECT DAMAGES (INCLUDING, BUT NOT LIMITED TO, DAMAGES FOR LOSS OF PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR INFORMATION, AND THE LIKE) ARISING OUT OF THE USE OF OR INABILITY TO USE THE SERVICE, OR ANY INFORMATION, OR TRANSACTIONS PROVIDED ON THE SERVICE, OR DOWNLOADED FROM THE SERVICE, OR ANY DELAY OF SUCH INFORMATION OR SERVICE. EVEN IF BASEMETALS.COM OR ITS AUTHORIZED REPRESENTATIVES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, OR (II) ANY CLAIM ATTRIBUTABLE TO ERRORS, OMISSIONS, OR OTHER INACCURACIES IN THE SERVICE AND/OR MATERIALS OR INFORMATION DOWNLOADED THROUGH THE SERVICE.

BaseMetals.com makes no representations whatsoever about any other web site which you may access through this one or which may link to this Site. When you access a non-BaseMetals.com Web site, please understand that it is independent from BaseMetals.com, and that BaseMetals.com has no control over the content on that Web site. In addition, a link to a BaseMetals.com Web site does not mean that BaseMetals.com endorses or accepts any responsibility for the content, or the use, of such Web site.

You agree to indemnify, defend and hold harmless BaseMetals.com, its officers, directors, employees, agents, licensors, suppliers and any third party information providers to the Service from and against all losses, expenses, damages and costs, including reasonable attorneys' fees, resulting from any violation of this Agreement (including negligent or wrongful conduct) by you or any other person accessing the Service.

contain projections or other forward-looking statements regarding future events or the future financial performance of BaseMetals.com Limited. We wish to caution you that these statements are only predictions and that the actual events or results may differ materially.

This agreement shall be construed according according to the laws of the United Kingdom.

© 2005 BaseMetals.com

BaseMetals.com is a trading name of TheBullionDesk Limited