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forecasts for metal prices upgraded

  1. 68 Posts.
    ** Refer to Citigroup expectations:-

    Forecasts for metal prices upgraded

    Andrew Trounson | March 06, 2008

    ANALYSTS continue to upgrade their metal, iron ore and coal price forecasts because of tight supplies and production disruptions.

    According to Macquarie Equities, the relative strength in commodity markets means that some mining stocks are set to be resilient amid the global stock market uncertainty.

    "In the context of day-to-day turmoil in the financial sector, we continue to believe that specific sections of the resources market should be viewed as a safe haven for equity investors," Macquarie said.

    It noted, in particular, strong gold prices, long-term strength in iron ore and coal and an improving outlook for aluminium.

    Macquarie yesterday upgraded its short-term forecasts for aluminium by 15-18 per cent, while also raising its near-term copper forecasts by 9-13 per cent and its nickel forecasts by 4-16 per cent.

    China's aluminium production has been hit by temporary power shortages, while South African output faces longer-term power restrictions.

    In iron ore, Citigroup expects supply to remain tight for at least another year and is tipping prices to rise a further 30 per cent in 2009-10 on top of the 65-71 per cent contract price rise secured by Brazil's Vale.

    Reflecting the tight market, Rio Tinto and BHP Billiton are still to agree prices, negotiating hard to secure at least the upper end of the Vale deal.

    Spot prices for Indian iron ore into into China continue to rise.

    "The market is set to remain tight for at least another year with demand increasing and producers struggling to keep pace," Citigroup said in a report this week.

    Goldman Sachs JBWere has also upgraded its 2009-10 iron ore price forecast from rollover to a 20 per cent rise. It sees prices falling back 15 per cent in 2010-11.

    Goldman has also increased its 2008-09 hard coking coal price forecast by $US50 a tonne to $US250 a tonne, a huge 155 per cent rise on last year's $US98 a tonne settlement.

    It has increased its thermal coal forecast by $US20 to $US130 a tonne, a 134 per cent increase on 2007-08 prices.
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