(Kitco News) - The major banks have mixed forecasts for base metals for 2014, with some banks upbeat on the sector. Those who see higher base metals prices said the industrial metal’s outlook could improve in 2014 if the global economic recovery occurs as economists forecast, and China will also remain important for the base metals. Those who see weaker prices said current high inventories and supply coming online will pressure the metals.
Below are several bank forecasts for the major base metals.
Base metals could see a “healthy performance” in 2014, even though inventories for some metals are stout and added capacity could keep a lid on excessive gains, the bank said. The sector will see support from global economic strength and continued Chinese demand. Copper has the “greatest potential for medium-term price appreciation, given its cyclicality, with zinc also likely to benefit from relatively limited capacity investment, relative to some of the other metals.” Their 2014 average base metals price forecast, in pounds, copper, $3.70; aluminum, 85 cents; nickel, $7; zinc, 95 cents.
The firm is bearish on copper, saying “the strongest supply picture in years will pressure some commodities, particularly copper.” Based on where copper traded on Nov. 19, $6,959, when Goldman released its estimate, they see the red metal ending 2014 at $6,200 a ton.
The base metals complex could look vulnerable going into the first half of 2014, especially if the Chinese market reforms start to play out, INTL FCStone said. “We are looking for another retest of the 2013 lows of around $6500-$6600 on copper at one point in the first half. We also suspect that the aluminum and nickel will have difficulties during the first half of the year, as prices are still not low enough to force incremental production out of the system,” they said.
From current levels, the bank sees all base metals rising on average in 2014, except tin, which they said would fall just slightly. In the early part of the year, some price pullbacks are likely when QE tapering starts. “However, over the medium term, the start of tapering will signal an improvement in the US economy and a move higher in the industrial cycle,” they said. They see aluminum prices averaging $2,100 a ton, saying that demand growth is strong and producers are cutting back, but high stock levels will limit the upside. For copper, the bank has an average price of 8,000 a ton, noting there are some upside risks for the red metal, but says worries about a supply ramp-up are likely to limit the upside. The medium-term prospects for lead “look good,” the firm said, as the automotive sector improves. They forecast lead to average $2,300 a ton. The bank said nickel’s fundamentals are weak and like to keep the metal range-bound, forecast the average price at $17,000 a ton. Fundamentals for tin are improving, but they still see prices just slightly below current values, averaging $23,000 a ton. For zinc, fundamentals in the medium-term are improving, and the firm sees prices averaging $2,200 a ton.
TD Securities forecast most base metals prices to trader higher than current levels next year. “But, not all metals will do equally well as they all will have very different supply/demand fundamentals driving them,” TDS said. “Supply constraints and rising industrial demand in China -- which may include more intensive use of galvanization in the nation’s automotive sector -- and increasingly but more modestly in the Western world make zinc and lead our favorite metals into 2015. While copper is expected to be above current levels for much of 2014, we do see a material downside risk in the latter part of the year, if supply starts outpacing demand as projected. In sharp contrast and despite an improved demand environment, large inventories and continued surpluses make us reluctant to take long aluminum and nickel positions.” The firm’s average 2014 price forecasts, in metric tons, include: copper, $7,093; zinc, $2,188; lead, $2,315; nickel, $16,810; and aluminum, $1,874.
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By Debbie Carlson firstname.lastname@example.org