Standard & Poor's Thursday increased its 2009 price assumptions for copper, nickel and gold, citing higher market prices year-to-date, and also futures prices.
However, S&P Credit Analysts Alex Herbert, Donald Marleau and Emmanuel Dubois-Pelerin lowered their 2009 price assumption for aluminum due to ongoing weak demand and supply.
Generally, we continue to expect near-term prices for base metals to be relatively weak, as demand in industrial end markets such as auto and construction remains depressed due to the global slowdown. Despite production cutbacks by companies in response to the difficult industry conditions, which are partly due to cash losses being generated by high-cost assets, we see that inventories are still high in certain segments, the analysts advised.
Our long-term price assumptions are also in some cases revised, to more closely reflect broader market views of demand and supply fundamentals, and cost curves, they said.
Aluminum and zinc assumptions are lower, compared with their respective positions in December 2008, while those for nickel and gold are higher, they added. Overall, we believe these price assumptions, which we use to derive base-case forecasts and ultimately our issuer credit ratings, remain conservative.
Gold. S&P raised its 2009 gold price assumption to $850 per ounce and the long-term price assumption to $600/oz, while assumptions for 2010 and 2011 remain unchanged. Prices for 2009 are supported by investors seeking a hedge on inflation risks and against uncertainty in financial markets.
Aluminum. S&P lowered its aluminum price assumptions to 65-cents/lb or $1,433 per metric tonne for 2009, 75-cents to 85-cents ($1.654-$1,874) for 2010-2011, and to 90-cents ($1,985) for the long term.
Copper. The copper price assumptions for 2009-2011 were raised to $1.75/lb ($3,860 per metric tonne) and kept the long-term price unchanged at $1.50 ($3,308).
Nickel. S&P raised its nickel price assumptions for 2009-2011 to $5/lb ($11,025 per metric tonne) and for the long term to $5.50 ($3,308).
Zinc. The zinc price assumption has been maintained for this year at 60-cents ($1,323), but lowered for 2010-2011 to 60-cents to 65-cents ($1,323-$1,433) and for the long term to 70-cents ($1,544).