Metals: Lower growth expectations, lower prices

Metals: Lower growth expectations, lower prices

‧ Base metals: We have reduced our forecasts for 2012 by a weighted average of 3.9% to reflect our revised GDP growth forecasts and the marked-to-market impact of a 2.4% fall in weighted average prices in 4Q11. Our largest downgrades for 2012 are in nickel (-10.0%), tin (-8.9%) and zinc (- 6.2%). Copper remains our most favoured base metal.
‧We still expect a modest recovery in economic growth in our base case in 2013 in response to EM policy initiatives. However, as a consequence of the basing effect of 2012, we have also lowered our 2013 forecasts by a weighted average of 2.6%, with tin forecasts down 11.8%, nickel by 5.8% and aluminium by 3.5%.
‧ Precious metals: We have lowered all our precious metals forecasts for 2012 to reflect the impact of expected US dollar strength. However, we still expect significant annual rises in gold and silver prices from strong investment demand.
‧ For 2013 also, we forecast further increases in precious metal prices, reflecting the benefits of negative real interest rates, with gold again our favoured precious metal.