According to China Natixis, base metals will rally this year as funds are set to maintain their buy side bias, while strong Chinese growth will overshadow lackluster growth in mature economies.
The investment bank said that in a report this week metals continue to gain acceptance as an asset class, are increasingly used by funds to diversify their portfolios and are seen as a play on China and on global economic recovery.
Natixis said that "Further investment interest in 2010 is likely to be generated by the acceleration in economic growth in Asian developing countries, as well as potential recovery in OECD economies. We therefore expect that investment funds will maintain their long side bias. The only reasons for a degree of caution are the exceptional gains seen in 2009, which have left prices well in excess of marginal production costs. This could potentially lead to bouts of profit-taking, but it is unlikely to precipitate a mass exodus from the sector."
Turning to lead, the best performing metal last year, Natixis said that battery demand will remain strong this year, while supply in China will be restricted by tight supply of concentrates and environmental upgrading.
The bank lowered its average forecast for 2010 lead prices MPB3, however, to USD 2,565 per tonne from USD 2,700 in January. It also pushed down its 2011 forecast to USD 3,075 per tonne from USD 3,240 per tonne in January.
The average zinc price forecast for 2011 was also lowered to USD 3,060 per tonne from USD 3,220 in January. Zinc prices jumped 112 percent last year MZN3 and Natixis expects gains this year and next to total 68.8% and 9.3% respectively.
On copper MCU3, the bellwether metal that gained a stunning 140% in 2009, Natixis expects the market to move from an estimated surplus of 393,000 tonnes in 2009 to a deficit of 142,000 tonnes in 2010.
The bank said that as a result of the improving fundamentals, we expect prices to average USD 7,885 per tonne over 2010. The tightness will remain for the foreseeable future and we forecast prices in 2011, averaging USD 8,476 per tonne.
Meanwhile, Natixis expects aluminium MAL3, the most widely consumed of all LME traded base metals, to average USD 2,370 per tonne this year and USD 2,489 next year up 42.1% and 5%, respectively. Last year aluminium jumped 45.8%.
(Sourced from Reuters)
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