London 29/03/2012 - UBS has revised its 2012 metals price forecasts, taking a more bullish view on copper and the platinum group metals (PGMs) but downgrading gold, nickel and iron ore on the likelihood of fewer government liquidity boosts and lower Chinese growth.
The broker also made some small mark-to-market revisions to its 2012 forecasts for copper, aluminium, nickel, zinc and lead without altering its longer-term views.
It raised its copper forecast to an average of $8,000 per tonne this year, up one percent from $7,934 previous, but sees prices dropping in the second half.
Global copper demand is set to grow 3.7 percent to 20.7 million tonnes in 2012, with Chinese consumption rising seven percent to 8.2 million tonnes. Meanwhile, total supply should increase 4.2 percent to 20.6 million tonnes.
Nickel will average $18,447 per tonne this year, down seven percent from $19,791 previously, UBS said. It then sees nickel strengthening to $18,844 per tonne in 2013, when stainless steel mills will become more comfortable with the demand outlook, up from $20,717 previously.
"The increase in supply continues to be the key theme impacting 2012 nickel prices," it said. "While there may be seasonal improvement in China's stainless steel production rates in the second quarter, we expect the growth in supply to be an overwhelming feature."
UBS lowered its zinc forecast average one percent to $2,248 per tonne from $2,270 previously, while leaving aluminium and lead unchanged at $2,226 and $2,159 respectively.
Meanwhile, spot iron ore price corrections in recent months and weaker economic activity in China have prompted the broker to lower its forecasts for the 2012-2015 period.
UBS now sees spot iron ore averaging $145 per tonne this year, down from its previous forecast of $157, and sees it at $141 next year, down from $153 earlier. Prices are currently just below $150 but fell below $140 in February.
On the precious metals side, it cut its gold price forecast 18 percent to $1,680 per ounce from $2,050 previously due to the continued US economic recovery, material erosion in the Federal Reserve's quantitative easing expectations, rising Treasury yields, a stronger dollar and protracted low interest rates in the US and Europe, it said.
Silver, which usually follows in gold's footsteps, will average $33.4 per ounce this year, down 4.6 percent from $35 previously, UBS predicted.
Conversely, it raised its platinum price forecast $35 to $1,700 in 2012 and palladium to $760 from $725 previously.
"Growth in emerging economies and the continuous string of robust US data all bode well," it said. "As macro concerns recede, participants are now able to focus on other aspects of the market, which is good news for PGMs."
Supply risks after the six-week strike at Impala Platinum in January, which cost it 120,000 ounces in lost PGMs production, are also price-supportive. Russian state exports of palladium are also likely to dwindle considerably this year.
"We make an allowance for 350,000 ounces (10.9 tonnes) for 2012, considerably more than the figure of 4-4.5 tonnes mentioned by Gokhran in October but still sizeably less than the 750,000 ounces (23.3 tonnes) estimated by Johnson Matthey for 2011," UBS noted.
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