Base metals 2012 prices cut as economic woes weigh

Analysts have revised down their base metals price forecasts for next year after recent financial market turmoil took its toll on the sector and as the global economic outlook remains fragile, a Reuters poll showed. The survey of 23 analysts, carried out over the last week, averaged copper at $8,950 a tonne next year, down 10.5 percent from a forecast price of $9,995 in a Reuters July poll.
Not all contributors responded to all questions. The July poll surveyed 38 analysts. Benchmark copper on the London Metal Exchange (LME) hit a record $10,190 a tonne in February but has since fallen more than a quarter to trade around $7,370 on Wednesday. All six base metals have trended lower since July as investors have shunned risk in fear of a global economic downturn and Europe's ongoing debt crisis.
"It's clearly macroeconomic issues - we're going to have very slow growth in Europe, very slow growth in the US and slowing growth in China, so these are all issues of concern," Societe Generale analyst David Wilson said. Average 2012 copper prices ranged from $7,500 to $10,125 a tonne. Forecasts for tin prices next year were cut the most, by 12.1 percent, to $26,750 a tonne. Three-month tin on the LME hit a record high of $33,600 in April, but has since lost ground as uncertainty about the pace of global economic growth prompted fears about demand for industrial metals.
Forecasts ranged from $23,259 a tonne to $29,250 a tonne. "... The outlook has rarely appeared so uncertain, with the potential for a domino effect from a single event risk," Barclays Capital said in a research note. Battery material lead saw its 2012 price forecast fall 11 percent to $2,369 a tonne.
"The underlying fundamentals of the lead market are positive for prices, but we expect annual average prices to fall next year to reflect weaker demand," said Caroline Bain, Senior Commodities Editor/Economist at The Economist Intelligence Unit. The International Monetary Fund last month warned of the risk of severe repercussions on global growth of Europe's sovereign debt crisis and a painfully slow US recovery.
The markets are eagerly awaiting a breakthrough to the eurozone's debt problems but a warning from Germany this week that a summit of EU leaders on Sunday would not produce a cure shows there is still some way to go. Focus also remains on China, a top metals consumer and the world's second-largest economy. Data this week showed China's economy grew 9.1 percent in the third quarter, its weakest pace since early 2009, just below market forecasts
Its steel and power output also fell, a further sign that economic problems in the West, and Beijing's year-long monetary tightening campaign, have begun to pinch. "I think everyone's wary of Greece and until someone has confidence about which way it's going to go, calling price movements is very difficult. If the situation becomes worse then demand will drop and prices will drop," Damian Brett, a project manager at Raw Materials Group, said.
"China will have a strong economy again, inflation might be an issue, but the economy will remain strong. If Europe struggles then China will see it as a buying opportunity." Price forecasts for highly-supplied aluminium were trimmed by 8.2 percent to $2,475 a tonne. "Physical demand will be supported to some extent in the coming months by the recovery in manufacturing and by reconstruction work in Japan, but deteriorating global economic conditions will undermine demand growth in general," the EIU's Bain said.
Zinc, used in galvanising, will rise less than previously forecast under the weight of a large oversupply. Its 2012 price forecast was cut by 9.3 percent to $2,222 a tonne. "Bulls in the market are focused on peaking Shanghai inventories and falling Global LME supplies. Also supportive is the buoyant Chinese steel market," ANZ said in a research note. "However, macro-economic uncertainty is a risk, stockpiles remain high by historical standards, and inventory draws may not be reflective of underlying demand."