London, 7 February 2011
RMG forecasts another strong year in metal price increases at a rate similar to 2010, after which prices are expect to increase at a slower rate in 2012 and be maintained at 2012 levels throughout 2013. From 2013 to 2015 metal prices are expected to soften due to the arrival of new supply although the RMG index is not expected to drop below current levels, implying continued high metal prices for the long term.
On-going industrialisation and urbanisation of emerging markets will ensure a high demand regime for at least the forthcoming decade. Increased infrastructure spend, such as increased power grid investment in China and a budding material intensive consumer consumption, as typically the expanding auto-sector in both China and India supports this assumption, thus spreading demand across all base metals and all emerging economies.
Raw Materials Group (RMG) regularly compiles forecasts for base and precious metals. Combining these forecasts RMG constructs its RMG metal price index.
Last year, 2010 the RMG index surpassed the 2007’s peak. The general recovery from the global financial crisis was expected but what has been surprising is the speed and strength of the recovery. RMG expect the trend to continue with a price level in 2011 similar 2010 with a slowing though still increasing price level in 2012. The rationale behind this is the pause in mine development, both for new mines and existing mine expansions, and hence supply increases from 2008 to 2010.
Of the specific metals, gold drew a particular following in 2010 reaching record weekly average highs from week 35 until the end of 2010, based mostly on investor demand shifting from paper to metal as currencies depreciated and government bonds took a hammerings. But the real standouts were silver and palladium, up from 14.58 and 261 USD/oz in 2009 to 20.23 and 529 USD/oz in 2010 respectively. The precious metals are again expected to increase this year and next, with particular higher prices expected for platinum and palladium due to continuing strong demand from China´s automotive industry. In fact RMG´s long term forecast for these two metals is bullish out until 2015 (whereas the other base and precious metals are expected to soften from 2013 onwards).
Of the base metals copper is the expected standout performer due to continuing supply shortages and maintained strong global demand forecast. This maybe further accentuated with the arrival of copper EFTs. For 2012 zinc is the forecast strong performer due to tightness in the metal balance driven again by shortfalls in supply as production from existing mines decreases and is not replaced by additional supply. RMG’s nickel price forecasts increases over the next two years are subject to further delays in the technically difficult but large metal output high pressure acid leach operations coming online later than scheduled. If the likes of Goro and Ambatovy are successfully commissioned in 2011 then nickel will enter a bear market.
RMG metal price forecasts
2010 | 2011 | y-o-y | 2012 | y-o-y | ||
Copper | USD/ton | 7553 | 9600 | 27.1% | 10000 | 4.2% |
Zinc | USD/ton | 2161 | 2400 | 11.1% | 2800 | 16.7% |
Nickel | USD/ton | 21852 | 25000 | 14.4% | 27000 | 8.0% |
Lead | USD/ton | 2149 | 2500 | 16.3% | 2700 | 8.0% |
Gold | USD/oz | 1226.6 | 1500 | 22.3% | 1550 | 3.3% |
Silver | USD/oz | 20.23 | 30 | 48.3% | 28 | -6.7% |
Platinum | USD/oz | 1611.17 | 1850 | 14.8% | 1950 | 5.4% |
Palladium | USD/oz | 528.52 | 830 | 57.0% | 900 | 8.4% |
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