Metals prices to take rollercoaster ride in '08

By Humeyra Pamuk - Analysis

LONDON (Reuters) - Metals investors are poised for a bumpy ride next year, caught between a slowdown in the United States and uncertainty whether China can take up the slack.

A possible slowdown in U.S., the world's biggest economy, could slash demand for base metals, as well as have a knock-on effect on Asian economies.

But many analysts believe robust growth from China, the world's top consumer of base metals, will make up for any possible loss with its insatiable appetite for metals.

"The Western economies are clearly in trouble with the impact of the credit crunch," Sean Corrigan, chief investment strategist at Diapason Commodities, said.

"The question is how far downward the reverse slope extends."

Problems in the U.S. housing sector and financial institutions reporting losses due to their exposure to the risky U.S. subprime mortgage market have escalated worries about the health of the U.S. economy.

Dampened sentiment in the global equity markets, strongly correlated with industrial metals, coupled with fears about demand have slashed the price of copper by about 20 percent since the start of October.

"The strongest correlation of the Standard & Poor's index with any commodities is the industrial metals. Further declines in the global equities could be a problem," Michael Lewis, global head of commodities research at Deutsche Bank said.