Tan Hwee Ann, Bloomberg
Melbourne: Goldman Sachs JBWere Pty. and Deutsche Bank AG raised their estimates for copper prices as demand from China, the world’s largest user of the metal, is exceeding expectations.
Copper is the top pick, Goldman analysts led by Malcolm Southwood said in a 27 March note. Deutsche Bank, Germany’s largest bank, raised estimates for the metal used in pipes and wires by 6% to $2.86 (Rs123.38) a pound in a 26 March note.
China’s copper imports more than doubled last month from a year ago on rising demand from construction companies, sending future prices up 6% this year. Its manufacturers drew on stockpiles last year when futures prices reached a record $8,800 a ton, slashing imports by almost a third.
“The rate of the rebound in China’s apparent consumption of copper has so far exceeded our expectations, and has contributed to a steeper recovery in the copper price than we had anticipated,” Goldman’s analysts said. It raised its forecasts to $3.14 a pound for 2007, up from $3.09 a pound.
Copper prices for immediate delivery have averaged $5,924 a ton, or $2.69 a pound, since 1 January, compared with last year’s average of $6,739.80 a ton, or $3.06 a pound.
Antofagasta Plc, which owns three copper mines in Chile, yesterday said prices may exceed the company’s forecast of $2.80 a pound this year as demand increases in Asia and Russia.
Goldman Sachs JBWere, the Australian affiliate of the world’s largest investment bank, expects the copper market to have a deficit of 202,000 tons this year, more than the 57,000 tons a year ago. China’s copper usage could grow 12% this year, exceeding 8% rate estimated earlier, Goldman said.
Both Goldman and Deutsche Bank also reversed their calls on iron ore prices for next year. Goldman expects iron ore to gain 5%, instead of a 10% fall. Deutsche Bank expects the commodity to rise 10%, instead of a 5% decline.
Rising steel prices, higher output by Chinese steelmakers and an export tax on the steelmaking ingredient imposed by India “conspired to materially increase the prospects for yet another price rise” in 2008, Deutsche Bank’s analysts led by Peter Richardson said.
Iron ore prices have risen for five straight years led by demand from Chinese steelmakers, the world’s largest producers. Prices may rise for another two years, Goldman said in its note.
Arcelor Mittal, the world’s largest steelmaker, on 20 March said it plans to increase prices in the US and restart idled plants because of rising demand and lower inventories. Chinese steelmakers, led by Baosteel Group Corp., this month agreed to halt iron ore purchases from India after the country announced an export tax of Rs300 per ton.
Macquarie Bank Ltd and Citigroup Inc. this month also revised their iron ore prices forecasts from declines to gains.