Base metals, led by copper are likely to overcome last week’s credit market crisis, if the initial sparks are any indication. The unscheduled US Federal rate cut of 0.5 per cent to 5.75 per cent coupled with the announcement of strike at the world’s fifth-largest metal producer, Southern Copper Corporation, are expected to drive base metals globally.

The US Federal rate cut is expected to bring some liquidity to the world’s financial markets, which ultimately could see a repercussion in the form of fresh hedge fund allocation for metals. Indications are that the US Federal Reserve is ready to take more action, if the present rate cut does not help to mitigate the damage to the economy from the global rout in the credit markets.

Market participants believe that the devastating tremors, measuring 8.0 on the richter scale, that hit Peru last week, resulting in the closure of major mines, will have a full impact this week because of shorage in supply to the global warehouses.

Peru’s Cerro Lindo copper, zinc and lead mine resumed operations last Friday after the production was halted because of the disruption in power supply. Since Cerro Lindo was the only major mine in the mineral-rich Peru to report trouble after the earthquake, a forward moving sentiment may persist. After all, the futures markets predominantly work on sentiment, said a trader.

However, uncertainties over the probable movement of metals this week cannot be denied if the liquidity crunch continues in the world’s financial markets, a trader said.

Meanwhile, copper for December delivery rose 5.65 cents, or 1.8 per cent, on Friday, ending a three-day slump, to $3.15 a pound on the Comex division of the New York Mercantile Exchange. The metal dropped further 6.3 per cent this week and has sliding for four weeks in a row.

However, overall copper prices is up by 9.6 per cent in 2007 and the price has been consistent gaining over the past five years. On the LME, copper for delivery in three months rose $270, or 4 per cent, to $7,010 a tonne ($3.18 a pound).

The metal reached a record $8,800 in May 2006. Stockpiles of copper monitored by the LME gained 1 per cent to 120,550 tonnes, the highest since June 11. Analysts believe that the future movement of the metal on the LME depends on the talks at Grupo Mexico’s mammoth Cananea copper mine, which produces 164,000 tonnes per annually, scheduled on Monday.