Daily outlook for base metals prices: Commerzbank

Quotes from Commerzbank Corporates & Markets:

-Base metals: Ever since Chinese traders returned to the markets, metal prices - and especially copper - have been on the up. This morning copper is trading at around $5,900 per ton and as such is successfully resisting the firm US dollar. In our opinion, the fundamental situation points to higher copper prices during the course of the year.

-After all, nearly all major copper producers have so far announced in their reports that they will be making significant cuts in investment this fiscal year. This should be reflected in lower production in the medium term. Supply could even be reduced in the short term, however, as Chile - the world's largest copper mining producer with a market share of 31% - is currently suffering from a major drought, as a result of which water restrictions have been imposed.

-Water is a key element in copper mining production, however. Many copper mines in Chile are located in the Atacama desert, which is in any case regarded as the world's driest desert. Anglo American and BHP Billiton, the two mining companies, have already warned of production cuts because of the weather.

-According to the state copper commission Cochilco, water scarcity poses a latent risk to mining in Chile. If production in Chile were to be reduced for any length of time, and if problems were also to arise elsewhere, the supply surplus envisaged for this year would doubtless turn out to be noticeably smaller.