It is hard to believe that we are coming up on the close of the first quarter of 2008. What a quarter it has been! We thought it would be fun to review our predictions from the beginning of the year and grade ourselves. At the same time, we will chime in with what we believe is in store for metals buyers and traders in Q2 and beyond. In case you missed our original predictions, you can find them here.

Stainless steel – we predicted a drop in price (for the year) based on falling nickel costs and reduced European and American demand. Surcharges are virtually unchanged from January of this year (though they have fluctuated). Nickel has seen quite a bit of volatility between January 1 and now according to this 60 day Kitco chart. In January, nickel was trading at around $12/lb and now the price is closer to $13/lb and appears to be coming off a bit, though the price between these two dates was definitely higher than both the opening and closing of this period. The nickel market is in surplus with production exceeding consumption by about 6,000 tons in January or 5% of monthly consumption, so strikes and ETF’s (Exchange Traded Funds) permitting, this will cap nickel’s upside. So we’ll give ourselves a C in terms of “no price drop yet” though Q2 may lead us to where we predicted stainless would be this year.

Steel – is behaving exactly as predicted…price increases came through for Q1 but demand is dropping off. We believe demand in Q2 will continue to ease. This will put price pressure on the mills and we leave our original prediction unchanged from steady to lower in the second half of the year. Provisional grade of B (since we haven’t actually seen the drop in price yet)

Aluminum – we said would maintain its price levels or even increase throughout the year. Aluminum is about $.20/lb more than it was in January. We are not changing our prediction here. Provisional grade of A.

Copper and Zinc – back in the beginning of the year we said copper and zinc were likely to see similar demand levels to aluminum though with copper in particular, we predicted new production coming on stream this year, hence a potential price decrease by the end of the year. At the same time, we warned of volatility within copper in particular due to its speculative nature. Ironically, the 6 month copper chart shows we started and have ended at nearly the exact same price. But, as we said, the volatility shows the fluctuations between one month to the next and even one day to the next. As of this writing, copper is about $3.62/lb though back in January it was only a little over $3/lb. Copper is proving particularly sticky, meaning the prices have been holding reasonably well when the market has dropped. Strikes and falling LME inventories have supported prices. The recent exit of speculative money saw the price drop last week but the fundamentals are supportive, like aluminum, for the market to remain at or around current levels. Expect volatility to remain though, copper makes up a significant percentage of the ETF mix and will suffer from the speculative volatility resulting from these inflows of money.

It was estimated that zinc production outstripped consumption by 1,005,000 mt to 978,000 mt at the beginning of this year with LME inventories of 120,000 mt and plentiful supplies of zinc concentrates. Consequently we see prices capped for this year as demand from the galvanizing market softens in North America and Japan and growth slows slightly in China and India.We have also recently updated several other metals categories. You can read our recent analyses of these metals as follows:

Gold and Silver – Last week we stated that gold will remain high as long as the prospects for the dollar remain low (and oil remains high). Gold is seen as a safe haven investment vehicle. However, longer term, we believe silver is likely to increase more.Cobalt – The cobalt market had been going a little haywire in mid January and did reach over $50/lb as predicted in this article. We also predicted the price would come down a bit and indeed, that too has happened. You can read the latest in an article from earlier this week.