Metals And Coals Prices Forecast To Be Lower In 2009

Metal and coal prices are expected to average “considerably lower” in 2009 as demand plunges in a global recession and producers can’t cut supply fast enough, Goldman Sachs JBWere Pty said.

Prices of coking coal may plummet by 60 percent, copper by 40 percent and aluminium by 28 percent, analysts led by Malcolm Southwood said in a note to clients yesterday.

Commodity prices dropped by 36 percent last year as the global credit crisis curbed demand and pushed the world economy into a recession. Mining companies including Rio Tinto Group, Alcoa Inc. and Aluminum Corp. of China Ltd. have slashed production.

“With gold the most plausible exception, we expect 2009 annual average commodity prices to be considerably lower versus 2008, with negative implications for resources sector earnings,” the analysts said. “We expect global off-take of most metals and minerals to contract this year,”

There will be oversupply of aluminum, copper, nickel and zinc and bulk commodities will also move into annual surplus in 2009, the brokerage said.

China, the world’s largest consumer of metals, will hold the “key to sentiment” on commodities this year, Goldman said. Demand from China is expected to be very weak in the first half, improving in the second half driven by stimulus spending and as de-stocking runs its course, the analysts said.

China plans to spend 4 trillion yuan ($586 billion) to support sagging growth by investing in metal-intensive projects including railways and homes.

Copper has the “best potential for a large price rebound” in 12 months as the chances for output growth are “very modest,’ the analysts said.

Price forecasts

2007 08 09 10 11 12
Aluminium USc/lb 120 116 84 100 112 120
Copper USc/lb 323 315 189 263 300 330
Nickel USc/lb 1689 955 567 725 825 850
Zinc USc/lb 147 85 60 73 83 93
Gold oz 697 872 815 848 883 919
Platinum US$/oz 1306 1580 835 869 905 941
Palladium US$/oz 357 354 200 200 200 200
Thermal coal $/t 55.65 125 70 75 70 70
Coking Coal $/t 98 300 120 120 110 110
Iron ore c/dmtu 80 145 101 101 91 82

Note: Iron ore prices are rounded.

Source: Bloomberg Australia