Commodity Strategists: Goldman Raises Copper, Nickel Forecasts
2005-03-18 11:39 (New York)
By Choy Leng Yeong
March 18 (Bloomberg) -- Goldman Sachs Group Inc., the third-
largest U.S. securities firm, raised its quarterly price
forecasts for copper, nickel and zinc traded in London, as demand
grows and speculators step up buying of commodities.
Copper may average $2,925 a metric ton in the three months
ended June 30, up from a previous estimate of $2,700, Goldman
said in a March 14 report. Nickel, used to make stainless steel,
may average $14,000 a ton, up from a forecast of $11,500; zinc,
used as a coating to make steel rust-resistant, was forecast at
$1,350 a ton on average, up from $1,155, Goldman said.
Higher prices ``reflect slightly stronger than expected
current economic activity in the U.S. and China, as well as
strong buying interest from momentum-based funds,'' Goldman said.
``Most base metals prices remain vulnerable to a sharp downward
correction in the second half as supply rebounds and thus allows
exchange stocks to recover.''
Rising prices for copper and other base metals are part of a
rally this past year in raw materials, including oil, coffee and
cotton. Commodity prices are the highest in 24 years as Chinese
demand rose and a drop in the dollar made commodities priced in
the U.S. currency cheaper for buyers using the euro or yen.
The Reuters-CRB Index of 17 commodities reached 323.33 on
March 16, up 13 percent from a year ago and the highest since
December 1980.
The rally has lured purchases by hedge funds and other large
speculators, who bought more commodity futures contracts than
they had sold as of March 8 and have the highest net-long
position in 10 months, figures from the U.S. Commodity Futures
Trading Commission showed on March 11.
Record Copper Price
Copper, which averaged $3,109 so far this year on the London
Metal Exchange, rose to a record high of $3,307 on March 16 after
China's investment in factories, real estate and other
infrastructure in January and February surpassed the government's
annual growth target of 16 percent.
The U.S. trade gap widened in January to $58.3 billion, the
second largest ever, ``driven by strong domestic demand,''
Goldman said.
The New York-based securities firm in a Jan. 28 report
reversed its previous forecast for a decline in prices of copper,
used in wiring and pipes, to average higher this year due to
rising Chinese demand. In its report this week, Goldman raised
its third-quarter forecast to $2,700 from $2,500 and its fourth
quarter estimate to $2,500 from $2,300.
Speculators bought 36,089 more copper futures than they sold
as of March 8, up 8.6 percent from the previous week and the most
in more than 15 months, the Commission reported on March 11.
`Ample' Supplies
Goldman, which expects ``ample'' copper supplies from mining
companies, forecast global production to exceed consumption by
205,000 tons this year after a supply shortfall of 678,000 tons
last year.
The global supply deficit will narrow this year to 259,000
tons and to 93,000 tons in 2006, the Lisbon-based International
Copper Study Group said today, after meeting yesterday with
government officials and industry executives from the world's
major copper producing and consuming countries. The supply
deficit was 719,000 tons last year and 386,000 tons in 2003.
Inventory in warehouses monitored by the London Metal
Exchange has plunged 79 percent in the past year, helping to fuel
a three-year rally in copper.
Australia's Oxiana Ltd. started its copper production in
Laos two weeks ahead of schedule and has a planned output of
30,000 tons this year. Vancouver-based First Quantum Minerals
Ltd. said last month it expects its Kansanshi copper mine in
Zambia to produce 145,000 tons annually starting next year, up
from its previous estimate of 100,000 tons.
Chinese Output
Jiangxi Copper Co., China's largest producer of the metal,
produced 415,000 tons last year, up 21 percent from 2003. The
company plans to maintain this level of output in 2005, Chief
Financial Officer Du Xinmin said in an interview on Nov. 10.
Copper demand in Europe and North America, which use two out
of every five tons of the world's metal, will cool this year and
help ease a supply shortage, the Study Group said.
Demand growth in North America will slow to 3.7 percent from
6.6 percent last year while growth among the 25 members of the
European Union will be 1.8 percent, compared with 2.3 percent
last year, the Copper Study Group said.
Goldman raised its third-quarter forecast for nickel to
$13,000 a ton from $10,500, and its fourth-quarter estimate to
$11,500 from $9,750.
Nickel, which averaged $15,198.1 a ton this year, reached a
four-month high of $16,350 a ton on March 4.
``Without any large new projects coming on line in the near
term and no expectations for a sharp slowdown in demand,'' there
will be tight supply of nickel through most of this year, Goldman
said.
Zinc may average $1,363 a ton this year, up from its
previous estimate of $1,181 a ton, Goldman said. Zinc, which
averaged $1,323.30 this year, reached a seven-year high of $1,450
a ton on March 16 partly on demand from makers of cars and other
products such as washing machines.
--Editors: Stroth. |
