[miningmx.com] — BARCLAYS Capital expects demand growth for metals to recover in the second half this year, with copper prices to rise by around 10% from current levels, while gold prices are projected to climb above $2,000 an ounce by the third quarter.
In its 2012 outlook for metals, Barcap said it expects the slowdown in metals demand growth to stabilise early this year and recovery to begin in the second quarter.
It forecasts copper prices to average $9,000 a tonne this year, although the projection is 11% lower than its previous forecasts for 2012, following a weaker-than-expected end to 2011.
Copper prices fell by around 21% last year, its first annual drop since 2008, as an uncertain global economic outlook raised fears about the metal’s demand prospects. On Tuesday it traded at $8,180 a tonne.
“Our economists are expecting the European situation to continue stabilising, for China to engineer a soft landing and for the United States to be pretty strong this year. So we’re working with quite a positive economic scenario,” said Barcap analyst Gayle Berry.
“(But) what we’re not expecting is the kind of recovery in demand that we saw in 2009/2010 because there are just too many headwinds for that kind of scale of recovery.”
For gold, Barcap sees the precious metal hitting $2,030 an ounce by the third quarter, with a 2012 average price of $1,875 an ounce, propelled by central bank appetite, uncertainty surrounding financial markets and longer-term inflationary pressure.
Gold has been a top-performing asset since 2001 as portfolio diversification, concerns over sovereign risk and rock-bottom interest rates helped lift prices from a low near $250 an ounce in 2001 to a peak above $1,920 in September 2011.
SUPPLY GROWTH
For all metals, apart from tin, Barcap forecasts supply growth of more than 3%, which in the case of copper is a marked strengthening from recent years, the bank said.
It remains positive on copper prices this year despite stronger supply and subdued global consumption growth, due to a projected market deficit of 363,000 tonnes.
“We are positive on copper prices because although it’s a better year for supply, we see a market that is in deficit,” Berry said.
However she said a pronounced slowdown in Chinese residential construction is among the biggest downside risks to the upbeat view on copper.
“If you have a situation where Chinese residential construction contracted, you wouldn’t have a 300,000 tonne deficit in the copper market this year. That really is going to be an important swing factor,” Berry said.
