Standard & Poor’s Ratings Services has lowered its price assumptions for nickel and aluminum for the rest of this year, noting that “most metals prices are unlikely to fall much further under our base-case scenario for 2012.”

“Our revised assumptions take into account the notable decline in spot prices for nickel and aluminum since our last update in January 2012, continued oversupply in the two markets, and the currently uncertain global economic outlook,” wrote S&P Credit Analysts Andrey Nikolaev and Marie Shmaruk in an advisory note published Thursday.

Since S&P’s January update, aluminum and nickel have fallen 11% and 16%–the steepest drops among the base metals. “The key reason for this underperformance, in our view, is the oversupply of the two metals,” said the analysts. “As for other metals, nickel and aluminum prices are also under pressure from the strengthening U.S. dollar and market concerns about Chinese demand growth.”

“We have left our 2012 price assumptions for the other metals and our 2013 and long-term price assumptions on all metals unchanged because we continue to factor in our assumption of a soft landing in China, where we forecast GDP growth of about 8% annually in 2012-2012,” S&P advised. “We also assume virtually flat GDP in Europe and about 2% growth in the U.S. for 2012.”

S&P also suggests that for most metals, “cost profiles of major producers will likely not allow further substantial price deterioration without a noticeable decrease in production, which we do not anticipate in our base case.”

Meanwhile, S&P advised it is leaving its long-term price assumptions for industrial metals unchanged “as we currently do not anticipate substantial changes in the long-term supply-demand balance.”

S&P’s metals price assumptions for the rest of this year include 90-cent per pound aluminum; $3.25/lb for copper; $7.50/lb nickel; 80-cents per pound zinc; and $1,300/oz gold.

Base-case scenarios for metals supply-demand in 2012

S&P anticipates moderate growth in aluminum demand this year. Therefore, the agency lowered its price assumption from 95-cents per pound to 90-cents per pound for this year.

Moderate growth in copper demand and nickel demand is anticipated in S&P’s base-case scenario. S&P lowered its price assumption for the rest of this year from $8 per pound nickel to $7.50/lb.

S&P also forecasts moderate growth in zinc demand. “The current substantial inventories create a considerable risk for the prices, however. At the same time potential closures of several major mines in 2013-2014 could substantially improve the supply/demand balance and support prices,” said the analysts.

Contrary to industrial metals, gold remains elevated as investors still seek a safe haven, as well as a hedge against inflation risks, S&P advised.