Goldie says 'these suckers are going down'

Posted by Izabella Kaminska
Jan 08 17:17
FT Alphaville

Goldman Sachs energy analysts Arjun Murti on the equities side and Jeff Currie on commodities have just presented their thoughts for the market in 2009 — a follow up to their outlook published earlier last month.

The conclusion?

As stated before here, they see the market bottoming just as soon as non-Opec production begins to be reined in and the glut of supply on the front end begins to expire. According to today’s conference call they see this starting to happen around the second quarter, with a return to a bull market coming through in Q3 and Q4.

Until then their view is prices could fall further — as low as $30 per barrel in February — rebounding eventually in Q2 to about $37 per barrel.

Driving the collapse to $30 will be the exhaustion of all storage options, a situation the market is heading to quickly.


By Madelene Pearson
Jan. 8 (Bloomberg)

Metal and coal prices are expected to average “considerably lower” in 2009 as demand plunges in a global recession and producers can’t cut supply fast enough, Goldman Sachs JBWere Pty said.

Prices of coking coal may plummet by 60 percent, copper by 40 percent and aluminum by 28 percent, analysts led by Malcolm Southwood said in a note to clients yesterday.

Commodity prices dropped 36 percent last year as a global credit crisis curbed demand and pushed the world economy into a recession. Mining companies including Rio Tinto Group, Alcoa Inc. and Aluminum Corp. of China Ltd. have slashed production.

“With gold the most plausible exception, we expect 2009 annual average commodity prices to be considerably lower versus 2008, with negative implications for resources sector earnings,” the analysts said. “We expect global off-take of most metals and minerals to contract this year,”

There will be oversupply of aluminum, copper, nickel and zinc and bulk commodities will also move into annual surplus in 2009, the brokerage said.

China, the world’s largest consumer of metals, will hold the “key to sentiment” on commodities this year, Goldman said. Demand from China is expected to be very weak in the first half, improving in the second half driven by stimulus spending and as de-stocking runs its course, the analysts said.

Price forecasts

2007 08 09 10 11 12
Aluminium USc/lb 120 116 84 100 112 120
Copper USc/lb 323 315 189 263 300 330
Nickel USc/lb 1689 955 567 725 825 850
Zinc USc/lb 147 85 60 73 83 93
Gold oz 697 872 815 848 883 919
Platinum US$/oz 1306 1580 835 869 905 941
Palladium US$/oz 357 354 200 200 200 200
Thermal coal $/t 55.65 125 70 75 70 70
Coking Coal $/t 98 300 120 120 110 110
Iron ore c/dmtu 80 145 101 101 91 82

Note: Iron ore prices are rounded.