Copper to outperform as metals prices diverge in 2011- Goldman
reuters.com
Mon Dec 13, 2010 8:11am EST
LONDON, Dec 13 (Reuters) - Metals prices will diverge to
follow their own fundamentals during 2011 as emerging market
economies drive ahead and demand recovers in developed nations,
pushing copper above $11,000, Goldman Sachs forecast on Monday.
"Metals with tighter cyclical fundamentals (copper, and zinc
in the second half) will outperform those with readily available
capacity (aluminium) or receding tightness (nickel)," Goldman
Sachs said in a research note.
Robust demand from top consumers such as China and improved
demand from developed nations against a mine supply shortfall
were expected to drive up copper prices and exhaust almost all
exchange stocks next year, Goldman Sachs said.
"We maintain our 12-mo ahead copper price forecast of
$11,000/mt and believe that prices could spike substantially
above these levels, most likely in late 2011," it said.
Exchange-based stocks in London and Shanghai sit at some
466,500 tonnes, down by around one third since early April.
MCU-STOCKS CU-STX-SGH
This supply scarcity is expected to set a premium for near
dated copper prices that triggers demand rationing, Goldman
Sachs said.
Premiums for cash copper reached their highest in over two
years above $63 a tonne in early December against the benchmark
contract and remain at elevated levels. MCU0-3
Elsewhere, the market for refined zinc is expected to remain
in surplus near term, but constrained concentrate and scrap
supply against growing emerging market investment demand suggest
inventories will top out next year.
Against this backdrop, rising demand for higher quality
steel in growth economies -- zinc is used for galvanising steel
-- is expected to improve zinc's fundamental picture in 2012.
DOWNSIDE RISKS
Aluminium price risk is skewed to the downside for early
2011 due to high stocks and excess capacity although prospects
improve for 2012, according to the Goldman Sachs note.
"Higher trend aluminum demand and rising energy cost support
could deliver better price performance heading into 2012," it
said.
Likewise, prospects for nickel see "significant" downside
risks in the year ahead as returning Vale (VALE5.SA) supply, new
project commissioning and ramp up, and slowing emerging market
consumption growth into mid-2011 push the market into a "sizable
surplus," it said.
A year long strike at Vale Inco's Sudbury and Port Colborne
nickel operations ended in July. ID:nN08128896
Vale's operations in Sudbury, together with its sister
operations in Voisey's Bay, account for roughly 10 percent of
global nickel supply.
"However, we believe that the outlook for dramatically
rising consumption demand from emerging markets will keep
long-dated nickel prices well supported," the note said.
FORECASTS
3-MTH 6-MTH 12-MTH
*COPPER CMCU3 $8,800 $8,800 $11,000
ALUMINIUM CMAL3 $2,125 $2,200 $2,200
NICKEL CMNI3 $19,500 $19,500 $19,500
ZINC CMZN3 $2,300 $2,400 $3,100
*Based on LME three-moth prices
** Prices per tonne of metal
(Reporting by Melanie Burton; editing by James Jukwey)
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