Morgan Stanley’s Commodities Forecast

English: Logo of Morgan Stanley

English: Logo of Morgan Stanley (Photo credit: Wikipedia)

June 9 2012

1) OIL

In a bull case Brent crude oil prices could rise to $125 per barrel

 

2012 average year price:
$105.00 / barrel

2013 average year price:
N/A

Oil prices are being weighed down by new sovereign debt issues in Europe and easing global tensions on oil supply. If OPEC production continues at the current rate supply

 

2) NATURAL GAS

Natural gas is expected to be oversupplied in 2012 and will pressure prices

2012 average year price:
$2.40 / million BTUs

2013 average year price:
$3.95 / million BTUs

Natural gas will likely be over-supplied in 2012 despite a slowdown in production. Slowing demand is however likely to build higher year-over-year inventories which will impact prices.

Slowing gas-directed drilling may help tighten balances towards the end of the year. aluminum because of the supply overhang

 

3) ALUMINUM

Morgan Stanley analysts are bearish on aluminum because of the supply overhang

 

Morgan Stanley analysts are bearish on aluminum because of the supply overhang

2012 average year price:
$2,300.00 / tonne

2013 average year price:
$2,400.00 / tonne

There is surplus aluminum but high cost producers are closing capacity and because prices are lower than marginal cost.

4)Copper 

 

 expected to outperform base metals

2012 average year price:
$8,400.00 / tonne

2013 average year price:
$9,000.00 / tonne

Copper prices are expected to remain high because of supply side difficulties. Prices will continue to remain high until the global inventory pipeline is replenished most likely after 2014.

 

5 )Nickel

Nickel prices depend on Chinese steel production and the success of major laterite projects

 

Nickel prices depend on Chinese steel production and the success of major laterite projects

2012 average year price:
$20,100.00 / tonne

2013 average year price:
$21,800.00 / tonne

Nickel prices are linked with Chinese stainless steel production and exports, which are at risk because of a decline in industrial production. The outlook for nickel is also tied to the success of four major laterite (iron and aluminum rich oil) projects and two projects in Brazil.

Zinc prices will only improve if China changes policy to boost construction

 

Zinc prices will only improve if China changes policy to boost construction

2012 average year price:
$2,100.00 / tonne

2013 average year price:
$2,200.00 / tonne

Zinc refinery production growth is slowing but it will be a few quarters before the inventories are cleared at current demand rates. The global zinc market is oversupplied and has been so since the first quarter of 2008 and there is unlikely to be a reprieve this year.

Zinc prices are only expected to perform better if China changes policy to boost construction, and if demand from Europe increases.

Gold prices are expected to be supported by low interest rates and unconventional monetary policies

 

Gold prices are expected to be supported by low interest rates and unconventional monetary policies

 

2012 average year price:
$1,825.00 / ounce

2013 average year price:
$2,175.00 / ounce

Investor demand for gold as a safe haven is likely to keep gold prices elevated. A low interest rate environment, unconventional monetary policies in the U.S. and Europe, and political tensions in the Middle East will also boost prices.

Morgan Stanley analysts expect gold to continue to be volatile.

Silver continues to be an attractive safe haven but is volatile

 

2012 average year price:
$35.00 / ounce

2013 average year price:
$42.00 / ounce

Investment demand in the silver market has waned of late but but negative real interest rates in the U.S. are likely to be behind investment demand for silver even without another round of QE.

After a sharp correction in Q2 2011 silver continues to be an attractive safe haven when compared with gold. But silver is volatile, vulnerable to weakening industrial demand and weaker supply all of which make it a less supported market than gold. The key risks for silver are that a weaker economic outlook in 2012 and 2013 will cut fabrication demand (manipulation of metal from one state to another), but not enough to deter production.

The slowdown in the global economy and decline in discretionary spending puts platinum demand at risk

 

The slowdown in the global economy and decline in discretionary spending puts platinum demand at risk

2012 average year price:
$1,687.00 / ounce

2013 average year price:
$1,836.00 / ounce

Morgan Stanley analysts are less bullish on platinum since it lacks the safe have status associated with gold and silver and has limited investment demand.

Jewelry and the automotive industry act as key end markets for platinum and in a weaker economic environment where consumers tend to be more judicious about spending, demand for platinum is at risk.

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