The Economist Intelligence Unit (EIU) predicts that prices for industrial commodities, measured by the EIU’s Industrial Raw Materials (IRM) index, will rise by an average of 12% this year. These high prices have not affected demand, partially because prices of all commodities have risen, making substitution less likely. An even greater driver of demand is China, whose demand indicators have all been growing in double digits. The IRM index is expected to slip 5% in 2008, but the EIU believes commodity prices will remain at record highs. Base metal prices are expected to increase 12% in 2007. The EIU acknowledges the increasing probability of a market correction that could be brought about by a small change in the supply–demand balance. But this is unlikely to happen in 2008: while the EIU forecasts that base metal prices will fall 7% next year due to increases in mining and metal production capacity, China’s demand for metals will balance this weakness in the market. Source: EIU

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