Merrill bullish on base metals

Merrill Lynch & Co, the world's third-biggest securities company by market value, raised its 2007 price forecasts for nickel, aluminum and lead, as inventories fell and because of supply disruptions.

The company raised its forecast for nickel 29 per cent to $13.88 a pound, aluminium by 16 per cent to $1.10 a pound and lead by 40 per cent to 70 cents a pound, in a report by analysts led by Vicky Binns dated March 14.

Demand for commodities, led by China, the world's fastest growing major economy, is driving metal price gains. The price of nickel has more than doubled in the past year, reaching a record today, while lead prices have risen 63 per cent.

"We continue to believe in the super cycle, that metals prices will be stronger for longer,'' the analysts wrote. "This means stronger than long-term average prices, not stronger than current spot prices.''

Nickel, used to make stainless steel, traded at $45,350 a tonne on the London Metal Exchange today, and has averaged $37,554 a tonne since the end of the last year. Those prices are equivalent to $20.57 a pound today, and an average so far this year of $17.03 a pound, according to Bloomberg calculations.

Aluminium traded today at $2,750 a tonne, or $1.25 a pound, while lead was at $1,925 a tonne, or 87 cents a pound, according to Bloomberg.

Merrill also increased its forecasts for silver by 6 per cent to $13.75 an ounce in 2007, and platinum by 6 per cent to $1,163 an ounce. Spot silver traded at $12.91 an ounce today, while platinum was at $1,211.50.