CORRECTED – Metals to rally this year on funds, China-Natixis

(Corrects zinc price forecast from 2010 to 2011 in paragraph 7)

* Funds to maintain their buy-side bias

* Acceleration in Asian growth to boost metals

* Forecasts for lead, zinc revised down

LONDON, Feb 23 (BestGrowthStock) – Base metals will rally this year
as funds are set to maintain their buy-side bias, while strong
Chinese growth will overshadow lacklustre growth in mature
economies, according to Natixis. (CNAT.PA: )

The investment bank said in a report this week metals
continue to gain acceptance as an asset class, are increasingly
used by funds to diversify their portfolios, and are seen as a
play on China and on global economic recovery.

“Further investment interest in 2010 is likely to be
generated by the acceleration in economic growth in Asian
developing countries, as well as potential recovery in OECD
economies. We therefore expect that investment funds will
maintain their long-side bias,” said Natixis.

“The only reasons for a degree of caution are the
exceptional gains seen in 2009, which have left prices well in
excess of marginal production costs. This could potentially lead
to bouts of profit-taking, but it is unlikely to precipitate a
mass exodus from the sector.”

Turning to lead, the best performing metal last year,
Natixis said battery demand will remain strong this year, while
supply in China will be restricted by tight supply of
concerntrates and environmental upgrading.

The bank lowered its average forecast for 2010 lead prices
(MPB3: ), however, to $2,565 a tonne from $2,700 in January. It
also pushed down its 2011 forecast to $3,075 a tonne from $3,240
a tonne in January.

The average zinc price forecast for 2011 was also lowered to
$3,060 a tonne from $3,220 in January. Zinc prices jumped 112
percent last year (MZN3: ), and Natixis expects gains this year
and next to total 68.8 percent and 9.3 percent, respectively.

On copper (MCU3: ), the bellwether metal that gained a
stunning 140 percent last year, Natixis expects the market to
move from an estimated surplus of 393,000 tonnes in 2009 to a
deficit of 142,000 tonnes in 2010.

“As a result of the improving fundamentals, we expect prices
to … average $7,885/tonne over 2010. The tightness will remain
for the foreseeable future, and we forecast prices … in 2011,
averaging $8,476 a tonne.” said the bank.

Natixis expects aluminium (MAL3: ), the most widely consumed
of all LME-traded base metals, to average $2,370 a tonne this
year and $2,489 next year, up 42.1 percent and 5 percent,
respectively. Last year aluminium jumped 45.8 percent.

Base metal price outlook 2008 to 2011

% Change

2008 2009 2010 2011 10/09 11/10

Al 2,571 1,668 2,370 2,489 42.1% 5.0%
Cu 6,952 5,164 7,885 8,476 52.7% 7.5%
Ni 21,029 14,700 19,340 19,340 31.6% 0.0%
Pb 2,085 1,726 2,565 3,075 48.6% 19.9%
Sn 18,499 13,593 17,500 18,000 28.7% 2.9%
Zn 1,870 1,659 2,800 3,060 68.8% 9.3%

Investment

(Reporting by Maytaal Angel. Editing by Amanda Cooper)

CORRECTED – Metals to rally this year on funds, China-Natixis