Barclays Capital weighs in on base metals

Commodities research analysts at Barclays Capital believe lead prices will move higher in the second half of this year, are most bullish on copper and tin next year, and have revised their 2012 price forecasts lower for nickel and zinc.

In a 68-page research report published on July 14, Barclays forecast that the “big move up in lead prices” will take place between now and the end of the year “as the market moves into deficit” and anticipates that the metal’s “price strength” will be “sustained” in 2012. “The forecast deficit in H2 next year will lead us to the tightest market (in stocks-to-consumption terms) since the end of 2008,” the report states.

Copper and tin are Barclays Capital’s favorite base metals because they face another year of deficit. “For tin we see nothing in the immediate horizon that would change the poor supply picture, while for copper, although we forecast the strongest year of supply growth in over a decade, this still is not enough to prevent the market from being in deficit.”

By the fourth quarter of 2012, tin prices will average close to $40,000 per tonne, the analysts forecast. “The release of our 2012 balances offers the spectre of a sustained bull run in tin prices into next year, with perhaps the most encouraging prospects of al the base metals,” the report stated.

As for copper, mine supply is “vulnerable” to “disruptions” including weather and labour disputes. This year, for example, lost mine output in has totaled about 375,000 tonnes so far – “larger than accounted for in our forecast.”

The “largest swing in the market balance” meanwhile, will be for nickel, which will move from “two years of deficit to surplus in 2012,” while the zinc market will likely remain in surplus for another year, “which would keep downward pressure on prices, particularly in the first half of 2012.”