UBS Securities has revised upward copper price forecasts because...

UBS Securities has revised upward copper price forecasts because it expects strong demand to meet supply problems in coming years. UBS now expects copper prices to average $3.80/lb this year and $3.90 in 2011. Copper cathode traded on the London Metal Exchange at $2.33/lb in 2009.

UBS previously has forecast a 2010 price of $3.30/lb so the new viewpoint is more bullish than the $3.22 projection by J.P. Morgan Securities, the $3.23 forecast from Bank of America/Merrill Lynch, the $3.25 outlook from Southern Copper of Peru, one of the world's largest copper producers, or the $2.93 projection of Germany's Commerzbank.

Chile's influential state copper think tank, Cochilco, expects the world copper average price for 2010 at $3.10/lb, followed by $3.20 in 2011.

"Copper is widely perceived as the most supply-constrained metal," UBS analysts say in a research note. "We would also tilt to the strong end of consensus on just how supply constrained copper is because our view is that the constraints on global copper supply are both cyclical and structural."

For this year, the Swiss bank expects copper demand to grow more than 10% to 19 million metric tons, leaving the copper market with a deficit of 600,000 metric tons-which it expects to rise to 800,000 metric tons in 2011.