The leading independent metals consultancy CRU is forecasting a re-bound in commodity prices this year and generally firm market conditions in the medium-term, with tin prices expected to rise more than most. CRU and ITRI work together in covering the tin industry. In a paper posted on its website on Friday, 26 separate commodity price forecasts have been chosen from the steel raw materials, base metals, aluminium and fertilizers sectors. CRU predicts that 17 markets will see higher prices in 2012 whilst 8 markets are forecast to show lower prices. By a ratio of 2:1 CRU believes that the fourth quarter of 2011 – which is used as the basis for all the comparisons – will mark the low point in the current commodity price cycle.
The belief in a commodity price rebound is based upon the foundation of a better than expected outlook for global growth in 2012. CRU still expects the Eurozone to contract in 2012, but thankfully its impact on the global commodity markets lessens year by year. The prospects for the global recovery rest heavily on the outlook for the emerging economies and in particular on China. Here CRU’s prognosis is brightening. In contrast with most developed economies, they benefit from low household indebtedness and conservatively run banking sectors, coupled, in several cases, with benign public finances. In the US, CRU believes the jobs data points to a steadying recovery and as a result CRU has lifted its economic forecast modestly.
The medium term forecasts are also driven by a belief in economic recovery (albeit at painfully slow rates). This economic impetus stimulates consumption growth and, as a result, supports sustainably higher prices throughout the price forecast period. CRU maintains the view that non-ferrous metals will post the strongest price performance. CRU is forecasting an average price growth of 27% for the six LME metals over the period with five LME metals in the top ten commodities. Tin is expected to have the second largest increase in prices in the whole group, with only palladium forecast to rise more. Major drivers of these price increase are both supply problems and mine cost inflation across the sector. This will be due to a combination of the exhaustion of large mines, the difficulties in exploiting new technologies, further supply project delays, cost inflation due to lower ore grades, cost inflation due to more complex ores and generally more challenging mining conditions.
http://www.crugroup.com/AboutCRU/cruinsight/Commodity_prices_to_rebound_in_2012
