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The past several months of economic uncertainty have taken their toll on base metals. While copper has held up well, other metals such as nickel and zinc have plunged back to earth.

In a research note titled "Seasonal Weakness or End of the Cycle?," Paradigm Capital analysts Dave Davidson and Jacob Willoughby take the view that most of the base metals are "adequately priced" based on their current supply/demand situation. However, they also revised their price targets on most metals upward to reflect the rapid rise in capital and operating costs that is plaguing the mining industry.

The analysts pointed out that the U.S. economy, if not already in recession, is certainly close to one. As well, there are legitimate concerns about how well Chinese demand for metals will hold up. However, they also noted that the movement of bulk commodities around the world continues at near-record levels.

They wrote:

While the miracle of global synchronized growth has dissipated, we are of the strong belief that after a few quarters of slow, but positive growth, the world's economy will re-engage and continue to fuel the global commodity boom. It is our view that the commodity cycle has temporarily stalled, not ended.

They noted that inventories for most metals remain low, though lead and zinc are two exceptions. But they "fully expect" prices to consolidate around these low levels over the next couple of quarters (though with plenty of volatility).

The analysts have raised their mid-term and long-term price targets for copper, zinc and nickel, while also making some minor upward revisions to lead and cobalt. In the case of zinc, they added to the speculation that more mines will close because of the high prices, saying they fully expect some "high profile closures."

These are their average price forecasts (per pound of metal):

Copper
2008: $3.35
Long-term: $1.75

Zinc
2008: $1.00
Long-term: $0.80

Nickel
2008: $12.00
Long-term: $7.00

Lead
2008: $1.05
Long-term: $0.70

Source: Paradigm Capital Analysts Raise Base Metal Targets