Xstrata boss warns of volatility in base metal prices

Commodity markets have become too "frothy", which could lead to greater price volatility in the coming months, Mick Davis, the chief executive of Xstrata, has warned.

Prices of traded metals such as copper have surged in recent weeks amid optimism that the worst of the recession is over.

Copper prices have returned to levels last recorded in October 2008 and aluminium, zinc and nickel have also hit ten-month highs in the past week.

“Prices have been moving up quite strongly and there is some froth in there,” Mr Davis said. “Sentiment has been driving prices rather than fundamentals so there is a high degree of volatility.” Mr Davis, the head of the world’s fourth-largest mining group, added that the general growth trend was still positive and being driven by renewed demand from China.