Copper is likely to reach a new high by 2013 as the market moves into a deficit and further tightens in the coming years, RBS Global Banking & Markets said on Thursday.
"Copper remains our most favoured base metal," RBS said in a research note, in which it forecast an average cash copper price of $9,000 a tonne by 2013, a rise of more than 46% from the current cash MCU0 price on the London Metal Exchange. Benchmark three-month copper price MCU3 hit a record high of $8,940 a tonne in July 2008 and traded at $6,115 a tonne on Thursday.
"Copper's demand prospects are not among the best but we believe copper producers will have the most difficulty in keeping up with growing demand. We forecast an underlying market deficit by 2011 and that by 2013 it will be fast approaching pre-recession tightness," the bank said.
Copper, used extensively in construction, has doubled in price since the beginning of the year on the back of restocking from China, the world's top consumer of the metal and on expectations of a recovery in the global growth.
RBS said it also expected aluminium price to top $3,000 a tonne in 2013, close to its all-time high of $3,380 a tonne struck in July 2008, as it expected supply to tighten by 2012.
"It may well have the greatest upside potential from current price levels in the longer term," the bank said.
Gold was set to average $950 an ounce this year, RBS said, adding gold would benefit from uncertainity ahead, potential dollar weakness and anticipation of inflationary pressures.
But the bank favours palladium the most among all the precious metals, as it bets that rebounding industrial demand will keep the market in large underlying deficit.
"We forecast that the price will more than double in the next four years to $700 an ounce plus," it said. The metal XPD=, used in auto catalysts, jewellery and electronics, currently trades at $290 an ounce.
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