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Commodity prices seen falling 50%

http://biz.thestar.com.my/news/story.asp?file=/2006/5/2/business/14119796&sec=business

MELBOURNE: Commodity prices may fall by as much as 50% over the next two years, led by copper, cobalt and alumina, Australia's Access Economics said, citing a poll of brokerages and research companies.

Prices of copper, nickel, zinc, aluminium and tin were expected to peak over the “next few months'', and then decline, said Canberra-based Access Economics in an e-mailed statement. Access Economics did not reveal which analysts it polled.

Copper, zinc and oil have surged to records this year as investors bought commodities to diversify from stocks and bonds, and as concern over supply disruptions increased. The money in commodity index investments may rise 38% to US$110bil this year, Barclays Plc has estimated.

Copper prices have more than doubled on the London Metal Exchange from a year ago.


German penny coins sift through the fingers of a worker at a copper refinery in northern Germany in this file photo. - RUTERSpic by Christian Charisius
“Copper prices soared to new record highs in April as supply fears surfaced and stocks reached their lowest level in around 10 years,'' Access Economics said. “Copper prices are now seen as the most overvalued when compared with current prices.''

Copper, used to make wires and pipes, may fall by almost 50% over the next two years. Alumina, used to make aluminium, could drop about 40%. Lead may fall by more than 30%, while coal, oil, aluminium and nickel could fall by more than 20%.

Analysts revised up their long-term prices by 6%, Access Economics said.

An Access Economics survey in July last year said commodity prices could fall by as much as 49% between June 2005 and June 2007. Then, it had polled 11 analysts including from Citigroup Inc and Deutsche Bank AG. – Bloomberg