National Australia Bank Ltd (NAB) said it has raised its forecast for its base metals index (bmi) to average 416.5 points in 2007, a year-on-year increase of 36 pct.
Previously it had forecast the index, which measures aggregate base metals prices, would average 357.0 points in 2007.
NAB said the index surged 9.7 pct in April from March to average 454.0 points due to rising nickel prices and a resurgence in the copper market.
NAB minerals & energy economist Gerard Burg said global metal demand remains driven by China, adding that the raised forecast for the bmi reflects recent upgrades to China's economic growth forecasts.
China's economy is forecast to expand by 10.7 pct in 2007 -- the same rate as 2006, Burg said.
'Slowing metal consumption in the US is likely to be more than compensated by increased demand in rapidly growing economies such as China and India,' he said.
Burg said NAB is forecasting global copper consumption to increase by around 4.2 pct in 2007, year-on-year, with China providing the bulk of this growth.
Burg said Chinese buyers have been replenishing stockpiles which were heavily drawn down in 2006.
Global refined copper production is forecast to increase by 3.8 pct in 2007 from the 2006 level.
The International Copper Study Group (ICSG) is forecasting the copper market will record a production surplus of around 176 000 metric tons in 2007 though this represents a narrowing of the market balance relative to 2006.
Burg said with strong demand from China --- including the restocking process --- NAB expects an reasonably balanced market in 2007.
He said NAB has revised its forecast for the average copper price on London Metal Exchange in 2007 upward to 6,950 usd a ton from 6,308 usd, making a 3.3 pct year-on-year increase.
Meanwhile, Burg said, nickel prices pushed higher in April, increasing by around 9.0 pct to average 50,452 usd a metric ton.
'Nickel stockpiles on the London Metal Exchange remain perilously tight -- with stocks at the end of April at around 1.3 days of consumption,' he said.
In the first four months of 2007 nickel averaged 43,550 usd a ton, a year-on-year increase of 181 pct.
'The continued strength of stainless steel production is underpinning global demand, with nickel supplies unable to rapidly increase,' Burg said.
He said hopes of fresh supplies are limited in the short term, due to construction delays at new projects such as the Goro project in New Caledonia and Ravensthorpe in Australia.
Burg said NAB has lifted its nickel price forecast to average 44,200 usd a ton in 2007 from a previous forecast of 35,057 usd, making a year-on-year increase of 82 pct.
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