Aluminium Market Outlook – First Quarter 2010
Global aluminium demand remains weak, supported almost solely by increased Chinese off take, in part due to restocking. As China’s restocking process comes to an end, an increase in demand outside China will be required to prevent renewed weakness in global demand. RBC ethat global aluminium demand declined by9.5% in 2009, and forecast a rebound of 10.9% in 2010 and 7.9% in 2011, and trend growth of 5.0% thereafter. The information contained herein has been obtained from sources, which we believe to be reliable, but we cannot guarantee its accuracy or
completeness. RBC Dominion Securities Inc. accepts no responsibility for the info contained herein.
RBC CM analysis suggests that capacity utilization rates have fallen to levels not ssince the early 1980s, and expect the industry to struggle under the weight of significant excess capacity throughout our forecast period. The recent rally has pushed the aluminium price above levels we would expect based on the historical inventory price relationship. Investment funds flows and concerns about weather related power shortages in China have driven the rally. RBC CM believes prices will be constrained by excess inventories and capacity throughout our forecast period. RBC CM forecasts an average price of $0.80/lb in 2010, $0.80/lb in 2011, $0.85/lb in 2012, and $0.90/lb in 2013. The long-term forecast is $0.90/lb in 2009 US$.

Nickel Market Outlook – First Quarter 2010
Global nickel demand collapsed in the second half of 2008 on the back of unprecedented stainless steel destocking and we estimate a further decline of 7.8% in 2009. Global demand remains weak, supported almost solely by increased Chinese off take, in part due to restocking. As China’s restocking process comes to an end, an increase in demand outside China will be required to prevent renewed weakness in global demand. RBC CM’s analysis suggests that inventories will remain wellabove the critical level throughout the forecast period. The estimated surp2009 suggests inventories ended the year at 16.4 weeks of consumptioline with the change in reported inventories. Our forecast rebound indemand in 2010 and beyond looks likely to be matched by increases in supply, leading to balanced markets and no significant drawdown in inventory
In the near term, Vale’s ongoing disruptions continue to support the nickeprice. However, with inventories in weeks of consumption near historically high levels, current prices appeunsustainable from a fundamental perspective. Investment fundshave emerged as a key driver of pricesover the past six months, and while iimpossible to know how long this will last, when the fundamentals finally reassert themselves and the Vale strike is settled, the historic inventory price relationship points to downside risk for nickelprices. RBC CM forecasts an average price of $7.00/lb in 2010, $7.00/lb in 2011, $7.00/lb in 2012 and $8.00/lb in 2013. The long-term price forecast is $7.50/lb in 2009 US$.

Copper Market Outlook — First Quarter 2010
Overall global copper demand remains weak. China has been the only source of increased demand thus far. Restocking has been a significant component of increased Chinese offtake. As China’s restocking process comes to an end, an increase in demand outside China will be required to prevent renewed weakness in global demand. RBC CM estimates that the global copper market recorded a surplus of 231,000 tonnes in 2009. Reduced supply, together with strong Chinese offtake, limited the market surplus. In the near-term, the market remains in surplus and inventories continue to rise. However, RBC CM forecasted rebound in demand should result in balanced to deficit markets beginning in 2010. RBC CM expects refined production to remain constrained by mine supply and inventories to decline significthroughout the forecast period as a result, supporting historically strong pricing.
The underlying fundamentals of the copper market remain very positive. The copper market remains much tighter than the other base metals. RBC CM forecasts an average price of $3.00/lb in 2010, $3.25/lb in 2011, $3.50/lb in 2012 and $3.75/lb in 2013. The long-term price forecast is $1.75/lb in 2009 U.S. dollars.