UBS Research raises long-term metal prices

Rising capex, operating expenses and currencies have driven UBS Investment Research to raise its long-term metal price forecasts for copper, zinc, nickel and lead.

In a Feb. 24 note to clients, UBS analysts Brian MacArthur, Onno Rutten and Chris Lichtenheldt raised their long-term copper price forecast by 28% to US$2.55 per lb., zinc by 13% to 85¢ per lb. and nickel by 2% to US$8.20 per lb. Lead prices were increased 122% to US$1 per lb.

“In the view of UBS’s team of commodity analysts, cost inflation in the mining sector – from FX, taxes, labour and services – has far eclipsed CPI,” they write. “While some costs are expected to recede with the cycle, there are rising structural costs that justify UBS’s long-term price changes.”

The analysts added that “widening spreads between spot and long-term prices, sustained inflation in mining costs, increasing resource competition and a paucity of new discoveries will likely prompt another fundamental reappraisal of long-term pricing over the next two years.”