Base metal prices rising

Bank of America Merrill Lynch has revised its base metal price forecasts for the year saying prices have risen faster than it had expected.

The bank has upped its 2009 forecasts for aluminum to 75¢ per lb. from 68¢; for copper to $2.15 per lb. from $1.77; for nickel to $6.52 per lb. from $5.67 per lb., and for zinc to 67¢ per lb. from 64¢.

Those prices should rise even further in 2010 to 79¢ per lb. for aluminum, $3.18 per lb. for copper, $8.39 per lb. for nickel and 82¢ per lb. for zinc.

“The world economy has been stabilizing, supported by the swift implementation of monetary and fiscal stimulus packages,” the bank outlined in an August 5 research note to clients. “Our macro colleagues now expect the global economy to expand by 3.8% year on year in 2010, driven by GDP growth of 2.6% in the United States and 10.1% in China, the key metal consuming countries.”

The bank’s analysts forecast an end to the slump in global metal demand in the second half of 2009 and said they “expect global consumption to grow at positive rates for all base metals” in 2010.

With the exception of aluminum, structural supply shortages remain for many industrial metals. Copper concentrate, for example, is forecast to move into deficit by 2011, the report predicts.

Inventories of refined copper, for instance, have been at an average of 1.5 weeks of demand, since 2004.

The report also noted that global vehicle production is set to expand and that the worst for steel is over.