TORONTO (miningweekly.com) Although base metals prices have not...

TORONTO (miningweekly.com) Although base metals prices have not escaped the effects of market volatility over the last couple of months, the factors that have supported the rebound in industrial metals in the last year remain largely in place, London-based Natixis Commodity Markets said in a report on Friday.

Base-metal prices are currently well below recent highs, but the correction from what was an 'overbought' position is not surprising, it said.

The big question is whether financial concerns will take precedence over the positive factors for industrial metals.

And, despite the worries about sovereign credit and Chinese monetary tightening, indications are that global growth has been steadily strengthening in recent months, Natixis said.

Although growth has been led by developing countries, and China in particular, there are encouraging signs from several Organisation for Economic Co-operation and Development countries too.

Data on the transportation of goods and raw materials encourage us that trends in demand for industrial metals are steadily improving.

Natixis also expects that Chinese economic conditions remain supportive for the global demand environment, despite concerns that monetary tightening by local authorities could squeeze economic growth.

Investor sentiment also remains broadly supportive for base metals, the researchers said.

Most the factors that encouraged funds to the sector are still in place strong demand growth in emerging economies, the potential for a cyclical rebound in consumption in the mature economies and limited growth in medium-term mine output (particularly for copper, lead and tin).

Natixis expects copper prices will average $7 885/t this year.

By implication, we expect prices to recover markedly later in 2010 and indeed could average more than $8 000 over the rest of the year, it said.

Aluminium prices are expected to average $2 370/t, lead is seen at $2 395/t, nickel at $24 000/t and tin is forecast at an average of $18 500/t.

Natixis expects zinc to strengthen in the fourth quarter of the year, and expects an average price of $2 560/t for the year.