Base metal prices rose Monday, having received a boost by news that China would inject 4.00tn yuan (US$586bn) into its economy to stimulate local markets, Barclays Capital base metals analyst Gayle Berry told BNamericas.
The price of copper rose 6.48% from the previous trading day to close at US$1.817/lb cash Monday on the London Metal Exchange (LME).
Aluminum closed Monday at US$0.894/lb cash, compared to US$0.887/lb cash the prior trading day, while nickel finished at US$5.400/lb cash versus US$5.173/lb cash. Zinc moved to US$0.502/lb cash from US$0.490/lb cash the previous trading day.
"The market sees it as positive for base metals consumption that the Chinese government is willing to act in order to try to stimulate domestic Chinese growth," Berry said.
The Chinese government reported through its official website it "will loosen credit conditions, cut taxes and embark on a massive infrastructure spending program in a wide-ranging effort to offset adverse global economic conditions by boosting domestic demand."
The stimulus package will be spent over the next two years to finance programs in 10 major areas including low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding from several disasters, the government report said.
The impact of the plan will be felt across all of base metals, Berry said, adding that the package was bigger than the market had been expecting, "although it needed to be because of the rapid deterioration in export markets."
"Fiscal stimulus packages like this, as well as a looser monetary policy, will help to provide some much-needed support to domestic Chinese consumption because the export markets are looking weaker and weaker," Berry said.
But despite the positive effect the package had on the copper price Monday, Berry said red metal prices have not yet reached rock bottom, as is also the case with other metals.
Barclays anticipates copper to average US$4,700/t (US$2.132/lb) cash on the LME in 2009.
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