Metals prices will improve - Poor's

Time of article published Jun 1, 2009

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Johannesburg - Standard & Poor's has upped its metals price outlook on signs of economic recovery, the global ratings agency said on Monday.

However base-case price assumptions remained conservative.

"For 2009, our price assumptions for copper, nickel, and gold are increased since our last update in December 2008.

"On the other hand, our 2009 price assumption for aluminium is lower due to ongoing weak demand and supply," said Standard & Poor's credit analyst Alex Herbert in a statement.

Following substantial falls in base metals prices in the second half of 2008, prices have stabilised at low levels in early 2009, Standard & Poor said.

"In recent months, prices have strengthened on hopes of global economic recovery, and as producers have cut production," the agency added.

Gold prices had similarly improved, supported by investor demand and financial market uncertainty.

"We continue to expect near-term prices for base metals to be relatively weak, as demand in industrial end markets such as auto and construction remains depressed due to the global slowdown," Herbert said.

"Despite production cutbacks by companies in response to the difficult industry conditions, which are partly due to cash losses being generated by high-cost assets, we see that inventories are still high in certain segments," he added.

Overall, Standard & Poor's believed their price assumptions, which were use to derive base-case forecasts and ultimately their issuer credit ratings, remained conservative.

As a result, Standard and Poor's has lowered its aluminium price assumptions to $1 433 per metric tonne for 2009, to $1 654 to $1 874 for 2010-2011, and to $1 985 for the long-term.

The agency raised its copper price assumptions for 2009-2011 to $3 860 per metric ton and kept its long-term price unchanged at $3 308 per metric ton.

It also raised its nickel price assumptions for 2009-2011 to $11 025 per metric ton and for the long-term to $12 128 per metric ton.

The agency maintained its 2009 zinc price assumption at $1 323 per metric ton, but lowered them for 2010-2011 to $1 323 to $1 433 per metric ton -- and for the long term to $1 544 per metric ton.

The 2009 gold price assumption has been raised to $850 per ounce and the long-term price assumption to $600 per ounce, while assumptions for 2010 and 2011 remain unchanged. - Sapa

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