Two industrial metals that made all time highs in 2007, yet declined nearly 60% since. Nickel is currently trading at $19,135.00 per tonne and zinc at $1,645.50. Nickel briefly ran up to $54,000 a tonne in May 2007. Because of the high prices in Nickel and Iron ore, stainless steel producers started to supplement refined nickel with nickel pig iron, a type of iron containing low grade nickel. Because of the recent slide in nickel prices however, most pig iron producers are now operating at a loss. The most efficient producers require nickel prices of over $24,000 a tonne to generate profit. I expect their margins to further decline as prices of iron ore decrease, increasing the demand for refined nickel. From a geopolitical viewpoint, nickel is a war metal. You simply cannot wage a modern war without large amounts of nickel as it's used in everything from armored plates to jet engines. Russia is currently the largest miner of nickel and given recent events surrounding South-Ossetia I expect them to curtail nickel exports in order to increase strategic stockpiles for their own military. Zinc is used to galvanize steel and in alloys that protect steel products from corrosion. Zinc can't be supplemented by another metal and demand has been steadily increasing. Despite this, zinc saw its price decline from a high of $4,600 in November 2006. This can largely attributed to an increase in supply as miners pushed forward the scheduled close of operational mines and restarted old mines and development projects. Because of current low prices most of those mines are opperating at a steep loss. Inflation in the mining sector is over 10% a year, while zinc prices continued to fall. A number of those mines are announced to shut down sooner than expected or will shut down in the near future. Lennard Shelf in Australia is a prime example of just such a mine. Its shutdown alone will shave 350,000 tonnes per annum off world wide production, which is greater than the current zinc oversupply of 220,000 tonnes. As supplies tighten, I think the market will look forward towards 2010 and 2011 and start to price in the exhaustion of a number of large zinc mines. The largest zinc mine in the world for example, Xstrata's Brunswick mine, is scheduled to close in 2010. I see demand continue to increase in the future. Steel is currently in high demand and Governments are alocating more money to spend on infrastructure. Zinc cannot be missed in bridge building, highway construction or power masts used to destribute electricity.