CAPE TOWN (miningweekly.com) - UK-based financial institution Barclays Capital anticipates that, while the commodity outlook for 2009 was inauspicious, there were signs that the market had began to bottom out.

Addressing delegates at the 2009 Mining Indaba in Cape Town on Monday, Barclays capital director of commodities research Kevin Norrish stated that the last five months had been exceptionally tough for the mining industry in terms of decreased demand for commodities, which had depressed prices.

The speed of the commodity price decline had been unprecedented and he added that this was evidenced by the fact that industrial and energy commodity stocks had lost 60% of its value in the last five months.

However, he believed that the commodity market was beginning to bottom out and the price of industrial commodities was starting to stabilise.

Indicators revealed that the markets were transitioning into the latter stage of recession and that the low point of growth would be in the second quarter of this year.

Norrish expected the first quarter to prove the bottom of the price cycle, and expected growth to improve in the second half of the year.

However, conditions were unlikely to be in play for a sustained recovery until late 2009.

Norrish listed three factors that encouraged the belief that the commodity sector would begin to improve later this year. These included the fact that Chinese business confidence was bottoming out, dry-bulk rates were moving up and the decline in US home loan applications has stalled.

In addition, he argued that China’s spending package would support economic growth and increased demand for metals, particularly copper, aluminium and zinc.

There were also tentative signs that investors were returning, albeit cautiously, to commodity investment, he added.

“It will be a difficult year but there is reason to believe that have seen the worse,” enthused Norrish.