Boom Times Over, Now for the Hangover
Boom times over, now for the hangover
HOT on the heels of Macquarie Bank's depressingly bearish commodity downgrade yesterday, ANZ Bank has released a set of disheartening markdowns to its forecast metals and mineral prices.
ANZ analyst Mark Pervan said the commodities copping the worst downgrades were iron ore and copper, which he said had the furthest to fall after posting the biggest gains.
Copper is already smarting from perilous drops earlier this year from highs of nearly $US5 per pound and ANZ is predicting the metal will go as low as $1.45/lb.
Meanwhile, things in China (cnmining) don't look that good close-up, with Pervan saying the view from a two-week trip to the country suggested market conditions were, and will become, worse than was previously thought.
Pervan said commodity demand in China appears to be slowing quickly, with stocks of iron ore up at ports and serious oversupply appearing in steelmaking capacity ' bad news for iron, coking coal and other steelmaking commodities.
As a result, ANZ has downgraded its iron ore price forecasts for 2009 to $US46 per tonne for fines and $US65/t for lump iron.
'We now expect contract iron ore prices to fall 50 per cent in 2009,' Pervan said in the research note.
Metallurgical coal prices will fall by around 50%, the bank suggested, while thermal coal prices will fall around 40%.
ANZ has also knocked its 2009 nickel price down to $4.83/lb.
'Worryingly, global economic lead indicators are at their lowest level in over 30 years, suggesting commodity markets will be tested with the weakest demand conditions in a long time,' Pervan added.
Meanwhile, even gold copped a downgrading with the bank estimating the precious metal would trade around $US655 an ounce in 2009 as a lower oil price and firmer US dollar continue to push gold down.
'An area to watch (on the downside) is increased gold sales from Central Banks possibly needed to help fund the recent huge financial relief packages,' Pervan said.
ANZ forecasts price drops across all commodities to bottom out by June 2009 at some 10-20% below current spot levels.
'Price recoveries post this period are likely to be mild and gradual, with major economies nursing heavy hangovers from the severe financial fall-out of the past 12 months,' Pervan added.
