Tungsten preferred

A number of research institutes in China predict in their recent reports that the prices of nonferrous metals will continue to go up in the mid-term as growing investment demand boosted by global low interest rates and ample fluidity will drive up the demand for the commodities.

However, they prefer minor metals to base metals for investment, in consideration of their different circumstances.

They believe the prices of minor metals depend more on the development of emerging industries and the government's protective policies for their exploitation, which is currently a widespread practice in many main producing countries.

In China, the government has made or is making plans for the development of such emerging industries as new energy vehicles, solar energy, large-capacity wind power generators, frequency conversion air-conditioners and aerospace industry, which will lead to a boom of demand for such minor metals as tungsten, indium and germanium.

Bank of China (BOC) International comments there is large space for rare metals' prices to rise as the demand from emerging industries maintains its growing trend and the Chinese government is likely to carry out a series of policies to support the emerging industries.

On the Chinese metal market, rare minor metals' prices were rising continuously until last week. The price of tungsten concentration went up 2.4 percent on week to 129,000 yuan per tonne, that of carbonated rare earth surged 11.2 percent on week to 29,800 yuan per tonne, and that of neodymium gained 11.1 percent on week to 498,500 yuan per tonne.

The government is also enacting series of reserve building measures and policies for protective exploitation of rare metals including rare earth, which as BOC International comments may further fan buoyancy of the minor metal prices.

In contrast, the price trend of base metals still faces some uncertainties, say, global economic policies and geopolitical conditions, for the short term though the research institutes are widely optimistic over their mid- and long-term outlook.

Shenyin & Wanguo Securities forecast that base metals prices would decline first before rallying and going up again in 2011. But it believes there is strong possibility for the prices to go up within a period of six months as the USA, Europe and Japan are trying to unleash the tie on liquidity in an attempt to revitalize the economy.

Many other brokers also echo that the demand and supply for base metals will be relatively stable in the following months, while the investment demand induced by the USA's second-round plan for quantitative easing of economy will possibly push up the prices. They are particularly optimistic over the prices of such base metals as copper, tin, zinc and aluminum.

But some analysts also alert that rising inventories and overcapacity may restrain the price rises of base metals. Shanghai Nonferrous Metals (SMM) believes overcapacity has long troubled the aluminum industry and aluminum price, and there is little possibility for aluminum to outrun other base metals.