Bloomberg News

Goldman Cuts Copper, Nickel Forecasts on Supply Prospects

January 16, 2012

(Updates with index performance in the third paragraph.)

Jan. 16 (Bloomberg) -- Goldman Sachs Group Inc. lowered forecasts for copper, nickel and zinc prices on prospects for increased supply of the metals.

The 12-month estimate for copper was cut to $9,000 a metric ton, the bank said in a report dated today. It projected prices of $18,600 a ton for nickel and $2,200 a ton for zinc. The forecasts in December were $9,500 a ton for copper, $21,000 a ton for nickel and $2,400 a ton for zinc. Its recommendation to buy gold in October has gained $266.80 an ounce and the copper recommendation in December is up $734 a ton.

Goldman’s new forecasts signal gains for copper, zinc, nickel and aluminum after the London Metal Exchange’s index of six industrial metals fell 22 percent last year, the biggest drop since 2008. Mined copper output growth will accelerate to 4 percent this year from 0.4 percent last year while demand for refined metal will climb 3 percent this year compared with 2.8 percent last year and 10 percent in 2010, Goldman said.

“Current prices generally present value to consumers,” Max Layton, a London-based analyst at the bank, said in the report. “We are most bullish on copper, moderately bullish on aluminum and zinc, and bearish on nickel” over six to 12 months.

Goldman Recommendations

Copper, oil and gold may lead a 15 percent rally in raw materials this year as economic growth in the U.S. and China offsets the impact of a European recession, Goldman said in a report last week. Goldman’s commodity recommendations to buy gold, brent oil, copper, zinc and U.K. natural gas since April 2011 have been profitable except for natural gas. It closed copper and zinc recommendations in December at losses and recommended investors buy them again at lower prices.

In three months, copper will be at $8,000 in three months, aluminum at $2,300, zinc at $2,050 a ton and nickel at $18,600 a ton, Goldman said. On that basis, aluminum and zinc will be higher over the period and copper and nickel lower.

Copper for delivery in three months rose 0.7 percent to $8,056.25 a ton by 11:22 a.m. on the LME. Aluminum was at $2,150 a ton, zinc was at $1,960 a ton and nickel was at $19,460 a ton.

Goldman lowered forecasts for this year’s average prices of all four metals , citing an “unexpected deterioration in demand” in 2011’s final quarter. Copper will average $8,567 a ton, against the October forecast of $9,200 a ton, and the projection for aluminum was cut to $2,321 a ton from $2,500 a ton, the report showed.

Zinc is set to average $2,104 a ton, down from $2,305 a ton previously, according to Goldman Sachs. The bank reduced its estimate for nickel to $18,650 a ton from $20,000 a ton.

Copper demand will exceed supply by 202,000 tons this year, compared with a shortage of 198,000 tons last year, according to the report.

--Editors: Claudia Carpenter, Nicholas Larkin

To contact the reporters on this story: Agnieszka Troszkiewicz in London at atroszkiewic@bloomberg.net; Maria Kolesnikova in London at $mkolesnikova@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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