The Hindu Business Line : Metals seen trading lower in 2007: Analysts

A recent Reuters base metals poll (mid-year) has thrown up interesting and varying perception among analysts about price behaviour in the second half of the current year and in 2007.

Analysts seem to be taking a somewhat differentiated view, with some metals set to rise during the remainder of the year, while others are expected to fall or remain largely unchanged.

Lead could recover

Aluminium is the only metal in which analysts seem to be happy with current price levels. A somewhat surprising result from the poll was the expectation that those metals, which have shown the biggest increases since the beginning of the year (nickel, copper, zinc) are forecast to fall from the current price levels. In contrast, lead — the metal hit hardest — is seen to recover some of its losses.

This suggests that analysts think some of the price moves — both to upside and downside — may have been overdone, commented an expert.

Where do analysts see base metals prices going in 2007? Metals are generally expected to trade lower, reflecting the expectation that metals will peak this year. However, the decline in prices is also influenced by the general tendency among analysts to see some mean-reversion.

Interestingly, many analysts substantially upgraded their 2007 forecasts recently as compared with what they said at the beginning of the year.

Additional factor

This reflects that many analysts may have underestimated the influence of investment fund flows in their last (January) forecasts. An additional factor could be that some markets have seen supply disruptions in the first half of the year. Copper, for instance, may show a small deficit this year. This means it may take longer time for the tightness to ease and stock levels to recover, an expert commented.