Copper to Outperform...
base metals sector already back at "mid-cycle" levels
Afterdeclining in July, Scotiabank's Commodity Price Index rose 3.5% inAugust, spurred on by strength in base and precious metals.
Author: Dorothy Kosich
30 Sep 2009
RENO, NV -
Drivenby institutional investors, hedge funds and sovereign wealthfunds,commodities as an asset class has significantly rebounded sincelast spring-driven by Chinese imports and U.S. dollar weakness.
ScotiabankGroup economist Patricia Mohr Tuesday said, ‘"Base metals prices havealready returned to profitable ‘mid-cycle' levels - a developmentnormally taking several years following the end of a global downturnand a testimony to the resilience and growing importance of China and‘emerging' Asia (including India) in the world economy," shesaid.
Inher Scotiabank Commodity Price Index analysis for September, Mohr notedthat China's imports of copper, zinc and nickel were at record levels, reflecting not only Chinese government stockpiling but also strength in underlying demand.
Mohrpredicted, "Copper will continue to outperform other base metals, givenunder-investment in new capacity during the last cyclical peak in2007-08."
She advised that new copper mine development "will be needed by2012, otherwise global mine supply will fall short of world consumption. The copper price forecast has been revised up to US$2.30 for 2009 and to US$2.90 for 2010."
Mohr forecast China's copper consumption will increase by 20% this year (excluding inventory build), helping to limit the global decline to negative 2.8%.
"Copper is among our top commodity market ‘picks' for investors over the next five years," she added.
MeanwhileMohr found molybdenum prices posted the largest percentage priceincrease in August, rallying 37% to US$17.41 in August.Widespread gainsin base and precious metals and steel alloy prices-more than offsetslight declines in potash, sulphur and uranium prices in August.
Potashprices are steadying now, she said. In the meantime, silver priceshave outperformed gold, "benefiting from an expected pick-upin‘industrial electronics' demand as well as silver's role asa‘precious' metal."
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