China key in metal demand - S&P
Ines Schumacher | Mon, 01 Jun 2009 17:03
miningmx.com
[miningmx.com] -- INTERNATIONAL rating agency Standard & Poor's (S&P) is looking to China to supply the demand fundamentals of base metals in 2009 as it adjusts its base-case metals price assumptions in the near and long term.
“Generally, we continue to expect near-term prices for base metals to be relatively weak, as demand in industrial end markets such as auto and construction remains depressed due to the global slowdown,” S&P said in its base metals price update on Monday.
China is considered a key factor in metal commodity demand. “The demand side is set to grow as a result of government stimulus plans,” he said.
However, in some commodities China has been flagged as a price depressant. “Especially in the case of aluminium, we feel there is a lot of latent capacity which could be a future price dampener,” Herbert said.
S&P has lowered its aluminium price assumptions to $0.65 per pound, saying its supply and demand fundamentals are one of the weakest in the base metals industry. Zinc has been adjusted negatively in the long term.
Copper, nickel and gold prices increased since S&P’s last update in December 2008.
“We were positively surprised by copper, the price of which came up quite considerably since December,” Herbert said. S&P has adjusted the copper price for 2009 to 2011 to $1.75/pound and kept the long-term price assumption unchanged at $1.50/lb.
Herbert said S&P’s copper price adjustment is more favourable towards copper producers in the near term. However, the agency has limited its credit risk in the long term by keeping price assumptions conservative.
The gold price assumption has been raised to $850 per ounce and the long-term assumption to a conservative $600.
“Gold is a little different to the other metals we follow in that it is judged as a currency rather than on a demand basis,” Herbert said. |
