Barclays Capital weighs in on base metals

Commodities research analysts at Barclays Capital believe lead prices will rise in the final months of the year, are most bullish on copper and tin for next year, and have revised their 2012 price forecasts for nickel and zinc.

In a 68-page report published on July 14, Barclays foresees 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. They anticipate 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’ favourite 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 December 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 all the base metals,” the report states.

As for copper, Barclays notes that mine supply is vulnerable to disruptions, including bad weather and strikes. This year, for example, lost mine output totalled close to 375,000 tonnes – “larger than accounted for in our forecast.”

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