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CORRECTED - Metals to rally this year on funds, China-Natixis

Wednesday, Feb 24, 2010
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(Corrects zinc price forecast from 2010 to 2011 in paragraph 7) * Funds to maintain their buy-side bias * Acceleration in Asian growth to boost metals * Forecasts for lead, zinc revised down LONDON, Feb 23 (Reuters) - Base metals will rally this year as funds are set to maintain their buy-side bias, while strong Chinese growth will overshadow lacklustre growth in mature economies, according to Natixis.


 (CNAT.PA) The investment bank said in a report this week metals continue to gain acceptance as an asset class, are increasinglyused by funds to diversify their portfolios, and are seen as aplay on China and on global economic recovery.


"Further investment interest in 2010 is likely to begenerated by the acceleration in economic growth in Asiandeveloping countries, as well as potential recovery in OECDeconomies. We therefore expect that investment funds willmaintain their long-side bias," said Natixis.


"The only reasons for a degree of caution are theexceptional gains seen in 2009, which have left prices well inexcess of marginal production costs. This could potentially leadto bouts of profit-taking, but it is unlikely to precipitate amass exodus from the sector."


Turning to lead, the best performing metal last year, Natixis said battery demand will remain strong this year, whilesupply in China will be restricted by tight supply ofconcerntrates and environmental upgrading. The bank lowered its average forecast for 2010 lead pricesMPB3, however, to $2,565 a tonne from $2,700 in January. Italso pushed down its 2011 forecast to $3,075 a tonne from $3,240a tonne in January. The average zinc price forecast for 2011 was also lowered to$3,060 a tonne from $3,220 in January. Zinc prices jumped 112percent last year MZN3, and Natixis expects gains this yearand next to total 68.8 percent and 9.3 percent, respectively.


 On copper MCU3, the bellwether metal that gained astunning 140 percent last year, Natixis expects the market tomove from an estimated surplus of 393,000 tonnes in 2009 to adeficit of 142,000 tonnes in 2010. "As a result of the improving fundamentals, we expect pricesto ... average $7,885/tonne over 2010. The tightness will remainfor the foreseeable future, and we forecast prices ... in 2011,averaging $8,476 a tonne." said the bank.


 Natixis expects aluminium MAL3, the most widely consumedof all LME-traded base metals, to average $2,370 a tonne thisyear and $2,489 next year, up 42.1 percent and 5 percent,respectively. Last year aluminium jumped 45.8 percent.

Base metal price outlook 2008 to 2011

                                  % Change
 2008    2009    2010    2011     10/09  11/10

Al  2,571   1,668   2,370   2,489    42.1%  5.0%
Cu  6,952   5,164   7,885   8,476    52.7%  7.5%
Ni  21,029  14,700  19,340  19,340   31.6%  0.0%
Pb  2,085   1,726   2,565   3,075    48.6%  19.9%
Sn  18,499  13,593  17,500  18,000   28.7%  2.9%
Zn  1,870   1,659   2,800   3,060    68.8%  9.3%
  (Reporting by Maytaal Angel. Editing by Amanda Cooper)

 

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