26/09/07

Supply-demand fundamentals are due to keep copper prices at an average above US$3/lb in the coming years, Paul Gray, commodities analyst at Goldman Sachs JBWere, said in a presentation Tuesday. “We`re extremely bullish on copper. There`s a struggle to identify new capacity quick enough to maintain a market stability,” Gray said in a speech during the 12th Brazilian mining congress in Minas Gerais state capital Belo Horizonte, organized by local mining institute Ibram. Copper projects currently under development are small compared to the strong need for the metal, according to Gray. “China is the main driver in demand for copper,” he added. On the other side of the curve, nickel is expected to experience a peak in prices in 2007 “and fall in the coming years,” as new projects come on stream, said the analyst. The metal`s price is also expected to decline as stainless steel producers are using other alloys in their production processes, a result of high nickel prices, Gray added. In terms of iron ore, the world`s three major producers – Rio de Janeiro-based CVRD (NYSE: RIO), Anglo-Australian mining house BHP Billiton (NYSE: BHP) and Anglo-Australian Rio Tinto (LSE: RIO) are “struggling” to meet increasing demand from clients, said the Goldman Sachs analyst. “A supply and demand balance in iron ore should occur starting in 2009,” he said. “I believe iron ore prices could expand by 30% in 2008.” CVRD, which sets the annual price benchmark, secured a 9.5% increase to its selling price for 2007, following a 19% rise last year and a 71.5% hike in 2005. Many industry analysts believe another increase will come in the next round of price negotiations, expected to begin in a few months. The Brazilian is the world`s largest iron ore producer and exporter.

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