|
|
|
|
|
|
| ||||
No bulls for gold, but other metals shin... Zimbabwe leads Africa in equity revoluti... Boeing surprises by leaving super-jumbo ... Central banks hold each other to ransom ...
RTZ-CRA
|
No bulls for gold, but other metals shine up well
Some analysts believe 1997 will set the scene for a sustained rise in most prices, writes KENNETH GOODING
METALS analysts say forecasting the price of base metals for this year is extremely difficult, because the global economic outlook for 1997 suggests a rerun of 1996. However, some of the analysts who contributed to the survey compiled here are convinced 1997 will set the scene for a sustained rise in the prices of most London Metal Exchange quoted metals, a rise that should peak in 1998-99. On the precious metals front, however, gold "bulls" are hard to find. This is not surprising, given that at this time last year gold seemed to many to be about to burst through the $400 an ounce barrier to stay there. This month gold has been at a three-month low, under the weight of US investment fund selling. Also, only the most unreconstructed bulls still believe silver can climb convincingly above $6/oz this year. Every forecaster who contributed to the table suggested aluminium and zinc average prices this year will be above those for 1996. Most predict nickel and tin prices will be higher and most say copper will be lower. The majority say gold's average price this year will be lower than 1996. But they are almost equally split in opinion about whether platinum and silver prices will be higher or lower. David Humphreys, chief economist at RTZ-CRA, the world's biggest mining group, says global economic activity is "strikingly similar to this time last year". However, the heavy cutting of stocks by consumers of base metals, which had a depressing impact on demand last year, seems to be over. "But there is no sign that consumers are buying in anticipation of a quickening in the pace of demand," he says. Humphreys suggests the outcome for base metals depends heavily on Europe, which accounts for between 30% and 40% of demand for these materials. "It is difficult to be bullish about economic growth in Europe," he says, because moves towards monetary union leave no scope for a loosening of fiscal restraints to boost economies. Nevertheless, "we should be able to squeeze another year of growth out of the US economy", but Japan "is going nowhere". The "Asian Tigers" are becoming increasingly important to the global economy, but "by their high standards they did not have a great year in 1996". Against this background, Jim Lennon, analyst at Australian bank Macquarie suggests the 1997 outlook for all the LME metals, with an exception of zinc, is extremely hard to call. "In all cases, except zinc, the markets are likely to be in close balance between supply and demand, with both surpluses or deficits being possible, depending on relatively small variations in assumptions made on economic growth, consumption, production and eastern bloc net trade," he says. "Zinc is the only metal with a structural deficit in that, even if demand fell sharply, supply would be unlikely to meet demand." Nevertheless, there is no denying the underlying the bullish mood. Nick Moore of Flemings Global Mining Group says: "With the exception of copper, all metal prices will be higher in 1997 and 1998 (than in 1996). With the exception of copper, and to a lesser extent tin, supply growth is not excessive. In 1998 capacity utilisation rates will be uncomfortably high at aluminium, nickel and zinc producers. The market is likely to focus on these looming bottlenecks in the second half of 1997. We believe 1997 will signal the start of a bull market for base metals that will peak in 1998-99." William Adams of Rudolf Wolff, part of Canadian resources group Noranda, says in the past commodity prices have risen strongly during periods of global economic expansion. "The 1993-95 bull run saw prices rally by 102% on average. The beginning of the rally started ahead of an improvement in the fundamentals - in 1993 and early 1994 LME stocks were still rising - but investment funds anticipated stronger demand and bought futures. As prices started to trend higher, the trade and speculators then joined in on the buying and prices scrambled higher. The same scenario looks set to unfold, although this time stocks are considerably lower than in 1993-94." RTZ-CRA's Humphreys is not so gung-ho. "The ingredients for the funds to come back into the metals markets are not there at the moment. But it would not take much to put them in place. In theory, for example, if the global economy moved forward aggressively and consumers started to build ahead, the funds might look at the aluminium and zinc markets." Apart from the attitude of investment funds, China is another unknown but important quantity in the metals markets. As Lennon explains: "Chinese buying and selling activity over the next three months will be of critical importance in copper, lead, zinc and tin. We suspect recent higher prices have discouraged further Chinese buying of copper, but don't expect any large outflows either." Only three of the forecasters suggest the average price of copper, the most heavily traded LME metal, will be above the 1996 average. One, Dan Roling of US financial services group Merrill Lynch, says many other analysts underestimate growth in demand. "Copper is particularly driven by infrastructure development and the Asia-Pacific area is going gangbusters in infrastructure development." Other forecasters use an annual demand growth rate of 2,4% for copper, he suggests, whereas for the past 10 years the average has been 2,8%. "Not to use 2,8% suggests a fall in world economic activity," he maintains. Finally, he suggests his forecast is not that bullish, given that the "Hamanaka effect last year was to cut 15 to 20 cents a pound off the 1996 average copper price". As for precious metals, David Williamson of the eponymous UK consultancy sums up the feelings of many former bulls. "At long last my bullish stance towards the gold price is being battered into submission. Demand for jewellery keeps rising steadily but so does production, while fear of central bank sales, notably from EU countries wishing to join the single currency, continues to overhang the market. With the world economy looking steady, and no major political crisis on the horizon. it seems likely any gold rallies will be met by selling from one quarter or another." - Financial Times
|
GRAPHS