Credit Suisse Raises Iron Ore Target to 50% Increase (Update1)

Feb. 4 (Bloomberg) -- Credit Suisse Group AG raised its price targets for iron ore and other bulk commodities for the next Japanese fiscal year, citing rising global steel output and increasing production costs in China.

Credit Suisse expects the iron ore contract price to increase 50 percent to $86 a metric ton, after earlier forecasting a 20 percent gain. It increased its coking coal call by 19 percent to $190 a ton, and thermal coal by 13 percent to $90 a ton. Xstrata Plc, Anglo American Plc and Eurasian Natural Resources Corp. are among the bank's top stock picks.

"We expect underlying demand in China to remain robust, although apparent demand growth may slow in coming months, and believe the ex-China recovery will be stronger than expected," analysts led by Michael Shillaker said in a report today.

Credit Suisse joins UBS AG and Barclays Capital in predicting higher commodity prices this year as demand improves. 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.

Credit Suisse expects copper will average $3.30 a pound in the 2010 calendar year, up 14 percent from the bank's previous estimate, on expectations supply will lag behind demand as the global economy recovers.

"Even though China is showing signs of moderation, an ex- China recovery will more than counterbalance the demand moderation from China," the bank said. "Although the copper market is now at surplus, an ex-China spur in consumption could turn 2010 into a deficit year."

It raised its 2010 estimate for aluminum 11 percent to $1 a pound, zinc by 11 percent to $1.05 a pound and lead by 58 percent to 95 cents a pound. The bank kept its nickel target unchanged at $8 a pound.