UBS revises up 2010 copper, zinc price forecasts

LONDON, Feb 3 (Reuters) - Swiss-based bank UBS said on Wednesday it had revised up its copper forecasts because it expects strong demand to meet supply problems over coming years.

UBS expects copper prices to average $3.80 a lb or $8,377 a tonne this year compared with a previous forecast of $3.30 a lb. For next year the numbers are $3.90 a lb or $8,958 a tonne from $3.20 a lb respectively.

The metal used in power and construction was trading at $6,842 a tonne at 1304 GMT on the London Metal Exchange.

"Copper is widely perceived as the most supply-constrained metal," UBS said in a research note.

"We would also tilt to the strong end of consensus on just how supply constrained copper is because our view is that the constraints on global copper supply are both cyclical and structural."

For this year the bank expects copper demand to grow more than 10 percent to 19 million tonnes, leaving the copper market with a deficit of 600,000 tonnes. It expects the deficit next year to rise to 800,000 tonnes.

UBS has also revised up its forecasts for aluminium, used in transport and packaging and for zinc used to galvanise steel.

"We forecast that world ex-China zinc demand will rebound by 13 percent in 2010, on the back of an end to destocking in the developed world, and strong reflationary pressure in the developing world," it said.

"Gold is our least favoured major commodity for 2010. The central reason is that we believe that the pace of both direct ETF investment and imputed investment demand cannot be sustained over 2010."

Following is a table of UBS' price forecasts for industrial and precious metals for this year and next.

Industrial metals are in $/lb and precious metals are $/oz.

Commodity      Period           Old F'cast      New F’cast      Pct Change

Copper              2010                 3.30              3.80                    15

                        2011                 3.20              3.90                    22

Aluminium          2010                 0.95            1.15                     21

                        2011                 1.00             1.15                     15

Nickel               2010                 10.00          9.20                      -8

                        2011                 8.50            9.50                      12

Zinc                  2010                 0.90           1.15                       28

                         2011                 0.95          1.17                       23

Lead                 2010                 0.80          1.15                        44

                        2011                 0.80          1.15                        44

Gold                 2010                 1050         1135                        8

                        2011                  975          1250                      28

Silver                2010                 18.30         18.00                     -2

                        2011                 15.61         19.50                    25

Platinum           2010                 1577.29      1640                      4

                        2011                 1657          1657                      0

Palladium          2010                  320.88       470.25                 47

                        2011                 452             490                      8

(Reporting by Pratima Desai; editing by James Jukwey)