J.P. Morgan says copper prices heading up in 2010
Copper, molybdenum prices could track GDP growth up
By Purchasing Staff -- Purchasing, 5/21/2009 9:18:00 AM
While its appears that the world copper price average in 2009 will stay under $1.90/lb, down from $3.15/lb in 2008, the 2010 price is being forecasted at $2.09 by the J.P. Morgan Securities commodity strategists in London.
Using this copper price forecast, the brokerage has raised its 2010 molybdenum price assumption to $12.50/lb--up from an earlier forecast of $11.50. (Moly is a co-product of copper smelting but it has fallen to an average $6/lb so far this year from $10.25 in 2008 because of the collapse in demand from steelmakers. Moly is alloyed into steel as a strengthening agent.)
The bullish 2010 copper price outlook is based on a J.P. Morgan projection that global gross domestic product (GDP) will grow at 2.6% next year--which is stronger than the latest 1.9% growth forecast by the International Monetary Fund.
So, either further deterioration in the global economy or slower-than-expected growth ahead would put downward pressure on copper and molybdenum prices. With year-to-date nonferrous metals prices under year-ago levels, MF Global metals analyst Edward Meir in new York points out in a note to clients that some of the talk “about an imminent recovery in base metals pricing has perhaps gotten slightly ahead of itself.”
There are other factors that could impact the copper price outlook, admits J.P. Morgan analyst Mike Gambardella in New York, noting uncertain buying activity over the next 18 months by China. The key factor, he says, “would be a pullback in copper purchases by China which many believe has been behind the recent rally in copper prices.” With the early-2009 upswing in London Metal Exchange copper prices having lost its momentum this spring, traders and analysts are wondering whether copper prices can be supported at high levels solely on Chinese demand, even if it is ahead of 2008 volume.
Also see: Copper prices may have hit bottom, but trends unclear
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