Usually one of the more bullish proponents of the commodities super cycle, Goldman Sachs have released today their most bearish predictions for the metals markets to date at the start of the LME week in London.
The firm that exited the CDW market 3-6 months before the market collapsed and with one of the most extensive (and successful) analyst teams on Wall Street has dramatically downgraded it’s predictions for oil and metals in the face of unprecedented economic turmoil.
Oil has been downgraded from $115/barrel to $70/barrel by year end with the potential to drop to $50/barrel if the financial and economic crisis worsens. Furthermore the bank has reduced the prediction of forward prices from $125 to $107/barrel for the end of 2009, with an average for the year of $86/barrel.
On metals, copper is expected to be $3,500/ton be year end from a previous estimate of $7,960/ton but is predicted to recover to $6,625/ton by the end of 2009 as supply side constraints kick in. Aluminum is predicted to drop to $ 2,060/ton by year end and to rise to $2,600/ton by late 2009.
With such a dramatic drop in metals prices combined with very restricted credit availability the bank expects capacity to be closed more rapidly than in previous downturns and/or supply disruption in less stable producing countries will result in a rebound in prices during 2009/10. As MetalMiner has suggested in recent articles, if there was even a time to be looking strategically at your metal spend the next 6 months will be the time to do it.