Commodities | Apr 13 2006
For those concerned about the commodities boom the message from both National Australia Bank and Macquarie is relax, prices should still move higher.
Both have joined colleagues at other places by once again upgrading their commodity price forecasts, primarily due to ongoing tightness in markets and low inventories, as well as supply disruptions in some cases.
Macquarie has made the most significant changes to its copper price forecasts, lifting its estimates by more than 45% in both 2007 and 2008 and by 25% in 2009, meaning the broker sees copper prices remaining above US$2.00/lb until the end of 2008. It has also lifted its zinc estimates by more than 8% next year and 11% in 2007.
Minor increases have been made in the broker’s forecasts for nickel and alumina, while coal prices have also been upgraded on the back of supply problems. The only bad news from an Australian perspective is the broker expects a stronger Australian dollar relative to the US dollar in 2008, which will have the effect of limiting some of the gains in the underlying commodities.
National Australia Bank is similarly positive, suggesting the commodities market should be a little stronger for a little longer. Its view is based on what it sees as stronger than expected economic growth, which is boosting the price outlook given the supply response remains muted for many commodities.
In the bank’s view the weaker domestic currency is adding to the gains this year, but like Macquarie it expects a stronger Australian dollar next year and so sees commodity prices easing back, though they will remain high compared to historical levels.
From an Australian perspective, the bank notes non-rural commodities have led the way thanks to strength in demand but the rural commodities have seen prices remain relatively flat.
Of the rural commodities the bank suggests the best performers are likely to be beef and sugar, while cotton prices should remain at around current levels.