|
|
 NEWS |
|
|
|
News
Accelerating commodity prices unsustainable
By Colin Brinsden, Sydney, July 26, AAP
Demand for industrial commodities from countries such as China and India is still accelerating, but may not be sustainable, independent forecaster Access Economics says. "But stronger for longer does not mean stronger forever," Access director Chris Richardson warns. "The short-term outlook is now so sweet that it risks being unsustainable."
And any subsequent downturn in commodity prices will have a severe impact on the Australian dollar, which hit a fresh 18-year high above 88 US cents this week, Access says in its quarterly Minerals Monitor. "China's ability to continue to travel at speed without blowing a tyre has been admirable. But its balancing act is getting notably tougher to maintain," Dr Richardson says.
Access had expected an increase in supply would slowly strangle surging commodity prices. But it says current trends are suggesting that the more traditional end to a commodity price cycle with a fall in demand now looking more likely. "Prices, if anything, may move higher for a time yet, but the chances of this ending fast and ugly at some stage needs to be kept in mind," Dr Richardson says.
While Access' panel of experts see bulk commodity prices peaking in 2008/09, they now expect iron ore prices to be around 14 per cent higher by the end of 2009 than current levels, and coal price to be up five per cent.
However, the uranium price is expected to 20 per cent lower than in June 2007, while the oil price is expected to peak in September 2007, before falling to $US57.75 a barrel in December 2009.
The panelists also say base metals are likely to fall. They expect nickel prices to fall by nearly 56 per cent by late 2009. They jumped 250 per cent in the last year alone, but fell in June after the London Metal Exchange introduced new lending guidelines.
Cobalt prices are expected to fall 55 per cent as new supply comes online in 2009, while lead prices are also forecast to fall by more than 50 per cent after rising a further 21 per cent in the June quarter.
Tin prices are forecast to fall 45 per cent by end-2009, having risen 11 per cent in the June quarter amid strikes at mines in Bolivia.
Zinc prices are forecast to by fall 44 per cent having already peaked, while copper prices are expected to fall 38 per cent over the same period having been propped by falling copper stocks and mine strikes in Chile, Mexico, Peru and Canada.
On the currency, the panel forecasts the Australian/US dollar exchange rate at 82.90 US cents in September 2007, before slowly falling to 76.70 US cents in December 2009.
Access says the Australian dollar is being driven by two key factors - relatively higher interest rates compared to its competitors, and world commodity prices. "The Australian dollar has been going great guns recently - not surprisingly given the strength of commodity prices and Australian interest rates," Dr Richardson says. "The panel see the Australian dollar falling as and when commodity prices do the same."
 Email to a friend
 Print this article
|
|
