Copper Update
Global Metals and Mining - The BofAML Commodities Team raised their
copper price estimates to $5.10/lb in 2011 and $5.44/lb in 2012, ~40%
above consensus (Metals Strategist, November 11, 2010) They expect the
red metal scarcity premium to the marginal cost of production to increase
due to: recurring structural supply constraints, BRIC economies continued
FAI, QE2 in the US (i.e. structurally weak USD) and the potential for
physically backed base metal ETFs. They also raised their 2011
aluminum, lead and nickel assumptions substantially to reflect strong
emerging market growth (despite a Western World slowdown) and supply
constraints. The team expects zinc to gain momentum in 2012 alongside
platinum, palladium and silver. Our commodity analysts warn of downside
risks on their forecast under a stronger USD, a result of sovereign credit
issues and/or protectionism leading to lower growth. BofAML analyst
Oscar Cabrera reiterates Teck Resources (TCK C17 $48.35, PO: $79.77)
as his top pick & seek copper exposure: TCK is on the BRIC's sweet-spot
with over 75% of its EBITDA coming from met coal and copper in 2011.
