Macquarie cuts commodity price forecasts

Macquarie has cut its commodity price forecasts due to financial problems and a slackening of Chinese demand.

SINGAPORE (Reuters)  - 

Australian bank Macquarie has cut price forecasts for a range of commodities for the next three years on expectations that problems in financial markets and weakness in China's construction sector will depress demand.

 In a note, the bank said it had cut 2009 price forecasts for steel, aluminium, copper, zinc and nickel by between 5 and 15 percent and trimmed its 2009 and 2010 thermal coal forecasts by $10 and $15 a tonne, respectively.

 "As a result of the global financial crisis and near-term concerns about the Chinese construction sector, we have reduced our demand projections for the main base metals and steel for 2009," it said.

 Macquarie also cut its expectations for precious metals.

 "We have cut 2009 gold and silver forecasts by 9 percent and 15 percent, respectively. We have slashed platinum, palladium and rhodium forecasts following recent price collapses in those commodities."

 But the bank warned investors not to get carried away with bear fever, particularly in steel, which has been under pressure from heavy consumer destocking.

 "We believe that there will be a significant easing in global -- OECD plus Chinese -- monetary policies before the end of 2008, leading to potential recovery in demand by mid-2009, and we also foresee a Chinese fiscal stimulus package will be introduced before the end of 2008 to partially offset weaker metals demand in residential construction."

 Many commodity markets were trading below marginal costs of production, and supply cuts were already starting to offset declines in demand, the bank said.

 "In zinc, nickel, copper and alumina, prices have already dropped to levels that leave a significant number of producers losing money, which has started to force production cuts and has also impacted on future expansion plans."

 Base metal price forecast changes

 London Metal Exchange cash average prices in U.S. dollars per pound, except alumina, spot market average in dollars per tonne.

Aluminium                  Copper

     New      Pvs   Pct      New    Pvs     Pct 2008   129.9

  133.1  -2.0      356.6  384.1  -7.0 2009   130.0   140.0

-7.0      300.0  325.0  -8.0 2010   130.0   130.0   0.0    

275.0  300.0  -8.0 2011   130.0   130.0   0.0      250.0  250.0

  0.0 2012   140.0   140.0   0.0      275.0  250.0  10.0 2013 

145.0   145.0   0.0      250.0  225.0  11.0 2014   150.0 

150.0   0.0      250.0  230.0   9.0 2015   155.0   155.0   0.0

 240.0  240.0   0.0 Lead                      Zinc 2008 

100.5    96.0   5 4       91.5   95.3  -4.0 2009    85.0  

85.0   0.0       85.0   90.0  -6.0 2010    85.0    85.0   0.0 

100.0  110.0  -9.0 2011   100.0   100.0   0.0      120.0

120.0   0.0 2012   120.0   120.0   0.0      140.0  140.0   0.0

2013   120.0   120.0   0.0      150.0  150.0   0.0 2014   100.0

  100.0   0.0      130.0  130.0   0.0 2015   100.0   100.0 

0.0      120.0  120.0   0.0 Nickel                       Spot

Alumina 2008  1041.8  1100.8  -5.0      381.0  394.8  -3.0 2009

  862.5   962.5 -10.0      350.0  350.0   0.0 2010   850.0 

862.5  -1.0      350.0  350.0   0.0 2011   700.0   700.0   0.0

 350.0  350.0   0.0 2012   700.0   600.0  17.0      432.1

432.1   0.0 2013   750.0   750.0   0.0      447.5  447.5   0.0

2014   800.0   800.0   0.0      463.0  463.0   0.0 2015   800.0

  800.0   0.0      478.4  478.4   0.0 Source: Macquarie

Research, September 2008

 (Reporting by Nick Trevethan; Editing by Clarence Fernandez)

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