* Analysts revise up forecasts sharply, Copper up 25 percent
* Question over how long excess liquidity will boost markets
By Veronica Brown
LONDON, Oct 15 (Reuters) - Copper is set to extend its bullish streak in 2010, with analysts overhauling mid-year forecasts due to unprecedented financial stimulus that they expect to boost demand for base metals, a Reuters poll showed.
But with higher prices and forecasts, some have warned that if a more stable macro environment fails to materialise the fallout could be brutal.
The survey collected forecasts from 28 metals analysts over the past three weeks and found that prices of benchmark copper would average $6,446 per tonne in 2010, up 25 percent compared with a similar poll published in July.
For graphics on the poll results, see:
http://graphics.thomsonreuters.com/109/CMD_10FRP1009.gif
"What we're seeing now is that the fiscal stimulus packages and to some extent the monetary stimulus brings about a stabilisation of the manufacturing industries in many countries," said Michael Widmer, metals analyst at BofA Merrill Lynch.
"Next year you should have more balanced metal demand growth," he added.
Major focus lies with the bedding in of extraordinary monetary and fiscal measures taken to quell the biggest global financial crisis since the Great Depression.
Interest rates in the world's leading economies were slashed, while central banks also implemented quantitative easing to address jammed credit markets.
Anticipation of increased demand has been a major factor alongside dollar weakness in helping London Metal Exchange copper and lead prices to double so far in 2009.
Zinc and nickel are up more than 50 percent, making base metals top performers in the commodities sector so far this year.
Even those analysts who have argued for some time that prices are running way ahead of fundamentals, have raised their forecasts, uncertain about how long excess liquidity created by mass quantitative easing -- or printing of money -- would remain.
"The likelihood is that central banks will not be decreasing liquidity just yet, so speculation might still have some room to go on," Commerzbank commodities analyst Eugen Weinberg said.
He said that in contrast to other metals, copper production this year was not reduced, leaving less room for a supply-side response if demand recovered solidly.
The contrast between the outlooks of most bankers and base metal consumers has been quite clear during the annual LME week gathering.
Many agree that without aggressive stock building by China's State Reserves Bureau, consumers and private households in the first half of 2009, the market would look rather grim. Order books going out into next year are sparse "Should speculation come to an end then a very strong correction is likely," Weinberg added.
ALUMINIUM SMOKESCREEN?
With LME warehouse stocks of aluminium still standing near September's record of more than 4.5 million tonnes, the fundamental picture is cloudy at best.
Even so, analysts saw prices at an average $1,897.50 in 2010 compared with an average $1,653 forecast in the July poll. So far this year, prices of the metal have increased 23 percent despite the overhang.
"What is more stunning about this dramatic price rise, is the fact that it is occurring against a backdrop of steadily increasing stocks," MF Global said.
Below the surface of massive stocks lies the source of price rises as a lot of the metal stored in LME warehouses is tied up in deals to release cash for producers.
Another top pick was battery material lead, with supply-side disruptions expected to continue providing upside risk to prices.
"Even though new production has been planned to come online over the next 12 months, the speed of smelter closures could create at least a temporary dislocation in supply," Barclays Capital said in a note to clients.
The survey showed lead prices on the London Metal Exchange will average $2,050 per tonne in 2010, up 24 percent from the July forecast, and nickel to average $18,200 per tonne in 2010, up 22 percent.
Tin is expected to average $15,800 per tonne next year, up 6 percent from July's forecast and zinc is seen at an average $1,963 per tonne in 2010, up 19 percent from the previous survey. Metal Prices at 1116 GMT Metal Last Change Percent Move End 2008 Ytd Percent
from move
Weds COMEX Cu 278.80 -4.85 -1.71 139.50 99.86 LME Alum 1875.00 -30.00 -1.57 1535.00 22.15 LME Cu 6135.00 -85.00 -1.37 3060.00 100.49 LME Lead 2160.00 -25.00 -1.14 999.00 116.22 LME Nickel 0.00 -18550.00 -100.00 11700.00 -100.00 LME Tin 14125.00 -275.00 -1.91 10700.00 32.01 LME Zinc 1990.00 -44.00 -2.16 1208.00 64.74 SHFE Alu 14900.00 -60.00 -0.40 11540.00 29.12 SHFE Cu* 48870.00 -310.00 -0.63 23840.00 104.99 SHFE Zin 15810.00 -230.00 -1.43 10120.00 56.23 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
For table of long term, 2009 and 2010 average price forecasts click on
For stories on long term price survey results click on
For analysts comments on industrial metals click on
For latest survey of economic indicators for G7 countries click on
(Graphics by Scott Barber)
(Reporting by Veronica Brown and Pratima Desai; Editing by Sue Thomas)