Battered base metals seen finding support in 2009

LONDON (Reuters) - Base metals prices are seen struggling in the short term, but will find a floor next year as the current financial turmoil fades, a senior commodity strategist said on Monday.

"It is a perfect storm right now," said David Abramson, chief commodity and currency strategist at BCA Research Inc. said at the opening LME week seminar.

"I don't think the perfect storm is going to vanish - it is going to fade away slowly and put a floor under metals prices... I am thinking next spring, the second quarter of next year," he said.

Abramson said falling demand and rising stocks which pushed base metal prices lower during recent months, would not disappear overnight. Copper prices have fallen around 45 percent from a record $8,940 per tonne in July.

"Lower demand for houses and cars, China is rolling over, financial investor liquidation of anything cyclical...a strong U.S. dollar...evaporating credit availability for infrastructural projects...together they are devastating (prices)," he said.

"The cyclical indicators for metals are all pointing down right now - it is not time to be a hero," he said.

However, longer term the measures taken by governments and central banks around the world to try to solve the current financial crisis would help demand for metals, as would firm demand from emerging countries.

"We have got monetary stimulus and the fiscal stimulus is just starting," he said.

"The U.S. will take inflationary and currency risks to avoid a repeat of the 1930's or even Japan in the 1990's - that is good for precious metals now and it is eventually good for base metals," he added.

LME inventories, which have been rising over recent months, are expected to fall due to the credit crunch and supplies could become tighter.

On a cyclical basis, Abramson also expected a weaker U.S. dollar would underpin prices and make dollar priced metals more affordable for holders of other currencies.

By 2011 demand from India is expected to support prices.

"This long term commodity boom market is not over," Abramson said.