Fairfax sees metals prices recover by end ’09

7th April 2009 By: Creamer Media Reporter

JOHANNESBURG (miningweekly.com) – Some metals prices recovery would start occurring towards the end of this year, investment bank Fairfax forecast on Tuesday, with analysts John Meyer and Marc Elliott saying many miners were poised for a recovery in market conditions.

The bank forecast in its new Fairfax World Investment - Resources / Energy (Wire) publication, that the average gold price for 2009 would be $900/oz and would climb to $1 000/oz in 2010, before falling to $850/oz again in 2011.

Platinum would reach an average price of $950/oz in 2009 and would climb to $1 000/oz in 2010, as stock is used up and demand returns.

The gold price had reached an average of $873/oz in 2008, while the platinum price was at an average of $1 577/oz in the same year.

The nickel price would continue its recovery over the next three years, reaching an average of $11 000/t in 2009, $12 000/t in 2010 and $14 000/t in 2011.

This was compared with the average nickel price of $21 291/t achieved in 2008.

The report, compiled by authors Dmitry Kalachev and Aofie McGrath, highlighted that metals prices would push higher as a result of a weaker US dollar, inflation fears and a move to alternative asset classes.

The authors noted that demand for metals would be key to the recovery in the price of metals.

The global slowdown in economic growth had already led to inventory destocking. Project delays and cancellations, as well as a growing demand for metals from emerging markets, would “prepare the ground” for the next phase of the cycle, stated the report.

Meanwhile, Meyer and Elliott said that a number of “trigger points” would be critical for the metals and mining industry, going forward.

These included China’s industrial activity, the roll-out of car scrapping schemes in some countries, consumer activity, financial stimulus packages and a currency rebalancing, with the US dollar weakening to regain a competitive balance with economies in the East, among others, the analysts said.

The authors of the report highlighted that the automotive industry, as one of the biggest consumers of a number of metals, was crucial for creating demand in the mining sector.

Negative monthly automotive sales would likely continue in the US and the European Union in the first half of this year, noted the report.

New vehicle sales in China and India had remained positive during 2008.

Automotive sales in the US and Japan had dropped in February, while sales figures in China and Germany were up by 20% year-on-year and India’s sales were up 10% year-on-year.