LONDON (Reuters) - Metals such as tin and copper could see their prices double in coming years, Ebullio Capital Management said on Monday, as supply worries and buoyant demand push the record-hitting metals higher.
Copper, used in power and construction, could hit $11,500 a tonne this year after touching a record high of $10,190 in February, Lars Steffensen, managing partner at Ebullio told the Reuters Global Mining and Steel summit.
He listed tin, copper, lead, zinc, nickel and aluminum, which faces high stocks and prospective oversupply, in his order of preference.
“I don’t think (aluminum) is going to double from here, whereas I think there is a very good chance that tin, copper, lead, zinc could double from here,” he said.
“(The timeframe is) over the next two, three, four, five years. It’s going to be orderly because there are so many people passive long in the market so they will be selling on the way out. There will be a lot of profit-taking.”
A dearth of supply, buoyant demand, low stocks and surging production costs are expected to help copper prices capture new records this year, a Reuters survey showed on Friday.
“I think we’re going to have another stab at $10,000 if we break it. I think we could see $11,000, $11,500 this year,” he said. “I think there is a floor around $9,000 in the market.”
He forecast copper trading in a range of $8,000 to $12,000 for the next 12 to 24 months. “If I had to bet my bottom dollar, I would say we would see 12,000 before we see 8,000.”
Steffensen said he had a positive outlook for metals.
“I probably wouldn’t sell any of them. If I was going to sell any, I would sell in relation to another metal,” he said.
“You have supply constraints, a good demand story, not just China but everywhere in the world. Having said that you also have today mining companies that have massive money to invest in new production so I don’t think it’s going to be as sure and as deficit prone as most people think across the sector.”
Copper demand is expected to grow in China as its economy booms, but some investors fear the growth rate may slow due to government measures to curb inflation. China is the world’s top copper consumer, accounting for 40 percent of global demand. Steffensen did not see efforts to curb inflation as a threat.
“Longer term they will make the growth in demand sustainable. The more Chinese raise rates the better the future looks for China,” he said. “I’m quite bullish for China.”
Investors have lamented a dearth of buying by China as it has dashed market hopes by not returning to the market as expected after its New Year holiday in February.
“They are well supplied but eventually they are going to come, and they will come in the second quarter,” he said.
Analysts are also watching to assess any impact from Japan, the world’s third-largest economy, where the earthquake and tsunami are threatening to strangle economic activity. Japan accounts for about 5 percent of global copper consumption.
“Within a couple of months, things will come back to normal. They will rebuild, commodities will be used,” Steffensen said.
Current high copper prices mean thoughts are turning to substitution. “Obviously people are looking out there but the substitutions that are out there, like plastics and stuff like that, are not going to be cheap either,” Steffensen said, citing higher production costs for those materials too.
Exchange-traded products (ETPs) are also the current focus for investors, with worries prevalent that they could tie up excess material, divert metal away from the normal supply chain and distort prices.
“So far they haven’t been much of a roaring success,” Steffensen said. “All the big guns who want to trade copper understand how futures and options work so they don’t need to go through a vehicle that actually just makes it more expensive to participate.”
Editing by Sue Thomas