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Bad News, Good News For Base Metals

Thursday, 5 Apr 2007 | 5:42 PM ET

Gold may glitter, but base metals often are also indicators of global economic health. Two analysts who joined "Power Lunch" agree that the commodities -- used in construction, electronics, healthcare and manufacturing -- are due for a correction. But the downturn may not be as general -- or as soon -- as some investors fear.

Commodity Bubble
Discussing whether the commodity bubble is about to burst, with Matthew Parry, Moody's Economy.com economist; Jim Steel, HSBC chief commodities analyst; and CNBC's Erin Burnett.

Matthew Parry, economist at Moody's Economy.com, is only "mildly bearish" on metals as a whole. He said the aluminum and copper market could be set for a correction, and believes that the latter has risen largely due to "speculative interest." He said that fundamentals "suggest we're entering a mild oversupply" of copper. The economist sees a slowdown over the next year, but not a dramatic one. Instead, he says the decline will merely "trim off the very top of the extremely rapid growth" of base metals.

HSBC's Chief Commodities Analyst Jim Steel pointed out the historic highs in base metals -- but said that until inventories get "a little higher," they likely won't correct "significantly." He declared that a pullback is "broadly" due -- but maintains it may take time for volatility to ease.

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  • Sue Herera is a founding member of CNBC, helping to launch the network in 1989. She is co-anchor of "Power Lunch."

  • Tyler Mathisen co-anchors CNBC's "Power Lunch." Mathisen also co-anchors "Nightly Business Report produced by CNBC."

Power Pitch

Kenny Polcari