London, March 2010

Attached are two notes on aluminium and copper prices by Chris Williamson, Chief Economist at Markit.  The notes incorporate the latest findings from our Markit Purchasing Managers' Indices (PMIs) for these two sectors.

The PMIs are favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends.

Aluminium

Aluminium prices rise above level consistent with current demand and supply fundamentals

The average price of aluminium on the London Metals Exchange ( LME) in February was US$2,048, representing a marked gain of over 54% from its low of US$1,329 reached one year earlier. At the time of writing, the price of aluminium had also risen by a further 9% since the start of March. However, the price is still around 30% lower than its pre-crisis peak.

Purchasing managers surveyed by Markit have also been reporting increases in the cost of aluminium. The PMI Aluminium Price Indicator – which reflects the proportion of companies across Markit’s worldwide survey panels that report a specific commodity to have changed in price – posted its highest reading for one-and-a-half years in January, before falling slightly in February.

Copper

Strong Chinese demand drives copper prices higher, but speculative factors also provide support

Copper prices have powered ahead at the start of 2010, buoyed by strengthening demand from China and elsewhere. On the London Metals Exchange (LME), the price of copper has climbed to $7,480 per tonne this week, approaching the elevated levels of 2008 and well up on their sub-$3,000 nadir in the aftermath of the Lehmans collapse.

Purchasing managers surveyed by Markit have reported a broad upward trend in copper prices over the past year and continued to do so in the February round of PMI surveys (although at a slower pace following an easing in LME prices in January). The continued increase in prices over the past fortnight is expected to drive the PMI Copper Price Indicator higher in March.

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Attachments:

Aluminium	142 Kb
Copper	90 Kb