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i wouldn't write copper off yet


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FACTBOX-Revisions to base metal price forecasts
Mon May 11, 2009 7:29pm IST

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May 11 (Reuters) - Despite the worst economic conditions in decades, analysts have mostly revised base metals prices forecasts higher, with Chinese stockpiling and hopes of an economic recovery later in the year seen supporting prices.

Record levels of London Metal Exchange inventories of aluminium remain a major concern for most analysts, but it now looks unlikely that prices will return to hit lows seen throughout last year.

Detailed below are some of the revisions and forecast price changes of base metals traded on the LME.

CITIGROUP GLOBAL MARKETS (April 17/May 11)

* "Copper prices have nearly doubled since the start of the year. The rally has been propelled by surging Chinese imports and increasing speculative positions."

* "We believe a recovery in demand is the only driver of a sustainable recovery. Nothing else will do the trick. All other factors only contribute to this underlying driver in our view. Prices may not rise with increasing demand if other factors are not also supportive, but demand recovery is a prerequisite."

* Citigroup believe the copper boom will not be sustained, but it now seems unlikely that prices will retreat to the levels expected previously.

* Forecasts copper prices for 2009 from 129 cents a lb to 161 cents a lb, and 2010 from 125 cents to 165 cents.

* Forecasts aluminium prices for 2009 at 61 cents a lb for June, and 60 cents a lb in December, and 60 cents in December 2010.

* "The main reason for the general improvement is that China continues to outperform. With manufacturing PMIs now moving into expansionary territory, there are hopes that demand growth in China will outweigh much of the weakness elsewhere in the world."

* Says however, that the general rally in base metals has been overdone and they are looking for a pullback in markets, where fundamentals remain poor, such as aluminium and nickel.

* "Copper stands out as having strong underlying fundamentals and should be the best performer in the weeks ahead."

* Revises up copper price forecast to $4,203 this year and to $4,375 next year. Aluminium forecast down to $1,476 in 2009 and to $1,750 in 2010.