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Commodities bottoming?

Mining Weekly notes a Barclays Capital commodities analyst told a convention in South Africa that the first quarter of 2009 is likely to see the worst of the current downturn, but that things should pick up by the end of the year.

Norrish expected the first quarter to prove the bottom of the price cycle, and expected growth to improve in the second half of the year.

However, conditions were unlikely to be in play for a sustained recovery until late 2009.

Norrish listed three factors that encouraged the belief that the commodity sector would begin to improve later this year. These included the fact that Chinese business confidence was bottoming out, dry-bulk rates were moving up and the decline in US home loan applications has stalled.

In addition, he argued that China’s spending package would support economic growth and increased demand for metals, particularly copper, aluminum and zinc.

In the mining sector, commodity prices have to recover before Caterpillar’s “replacement cycle” argument kicks in: lots of operators have old Cat equipment that needs to be replaced, but the only way it’s affordable is if the metals and minerals bring in significantly more than they cost to produce.

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Tom Mangan posted at 8:40 am February 9th, 2009 |

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