Feb. 4 (Bloomberg) -- Copper may jump 34 percent this year as the global economic recovery gathers momentum, according to Barclays Capital, a unit of London-based Barclays Plc.
The cash contract on the London Metal Exchange may average $6,875 a metric ton in 2010, 5 percent higher than an earlier estimate, the company's Singapore-based analyst Yingxi Yu, said in a phone interview today. Immediate-delivery copper in London averaged $5,148 a ton last year, and traded yesterday at $6,567.
Barclays joins Morgan Stanley and UBS AG in predicting higher copper prices as demand improves. Copper is an indicator for the world economy and sets the pace for other industrial metals because about two-thirds of all the metal produced is used in electrical applications, according to the Copper Development Association.
"The combination of growth starting from a very low base and still very stimulative, depression-combating economic policies will continue to support growth at least for the first half of this year," said Yu. "There is likely to be a phase of restocking in the OECD countries, which have gone through a period of aggressive destocking, and that should help to contribute to the growth numbers as well."
The International Monetary Fund forecast Jan. 26 that the global economy will expand 3.9 percent this year, compared with its October projection of 3.1 percent. Even so, the agency said that the global financial system remains "fragile". Barclays is calling for global growth to average 4.2 percent this year.
Barclays increased its copper-price forecast 22 percent to $7,900 in the first quarter, 10 percent to $7,400 in the second quarter and 3 percent to $6,200 in the third quarter. It lowered its fourth quarter call 14 percent to $6,000.
Cash copper prices have slumped 11 percent this year on concern China and the U.S., the largest consumers, will pare economic stimulus and curb liquidity that helped the metal more than double last year.
"We would continue to be relatively positive overall over the first half of the year and start to look for opportunities to move to the short side of the market going into the second half in preparation for a potential tightening of monetary policies globally," Yu said.
Barclays expects aluminum to average 25 percent higher at $2,088 a ton, zinc to average 39 percent higher at $2,300 a ton, and lead 27 percent more at $2,188 a ton. Nickel may average 40 percent higher at $20,375 a ton, and tin 33 percent more at $18,013 a ton.
"The recent stalling in price momentum is actually concealing improvements in the fundamental conditions of base metals markets," said Yu. "In terms of end user sectors, manufacturing and autos do appear to have moved well above their bottom and that should translate into higher metals demand as well in the next few months."
For 2011, Barclays forecast copper at $7,000, aluminum at $2,300, zinc at $3,000, lead at $2,200, nickel at $25,000, and tin at $18,500.