- The pace and scale of declines in metals prices over the past month is unprecedented and reflects the seismic change in global economic growth expectations. In a short space of time, the market has switched from pricing in a mere slowdown in global GDP growth to pricing in a full blown recession.

- Demand is of course only half of the story and the impact of the recent dramatic price declines is leading to a rapid supply response. By metal, the scale of the cuts correlates closely to the amount of output that is cash negative. Thus nickel, zinc and aluminium are the markets where output has been cut most sharply.

- Over the next few quarters the outlook for metals demand is bleak; surpluses will be building and spare inventory will be shipped into exchange warehouses. However, further ahead, the message is that unless metals demand turns out much worse than we expect in 2009, the rapid response of the supply side so far suggests that the large surpluses that have characterised previous periods of slow economic growth may be more limited this time around.

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