Prices of most base metal are expected to come off their current high levels next year as rising output more than offsets ongoing demand strength, National Australia Bank said Thursday.
Even so, NAB's minerals economist Gerard Burg noted significant upside risk to the bank's price forecasts amid the prospect of further supply delays at a time of historically still low global stocks.
Burg forecasts flagship base metal copper to fall to US$6,700 a metric ton by the fourth quarter of 2007 from US$7,300/ton this quarter. He expects the red metal to average US$6,875/ton over 2007 based on a modest surplus.
However, copper is expected to rise in the first quarter of next year to average $7,500/ton as China-led demand stays firm.
Aluminium is tipped to average US$2,325/ton next year from this year's US$2,542/ton, while lead is forecast at US$1,020/ton compared with an average of US$1,242/ton this year.
Nickel too is expected to ease next year to average US$26,750/ton from current near-record levels above US$32,000/ton.
However, prices of the stainless steel ingredient are likely to remain vulnerable to upside pressure and won't "move significantly lower until there is sufficient production capacity to rebuild stockpiles," said Burg.
He expects the global nickel market to be balanced in 2007 but notes risk from ongoing delays to major projects such as BHP Billiton's Ravensthorpe mine in Western Australia.
Bucking the trend is zinc.
Burg expects the galvanizing metal to continue its record-breaking run of recent months as already critically low stock levels continue to shrink due to miners' inability or unwillingness to respond to still-strong global demand.
Zinc is expected to average US$4,274/ton this quarter, rising to US$5,000/ton by the fourth quarter of 2007.
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