Indiana Grain Company, LLC

Posted: 03/02/10

By: tomgrisafi

Commodity prices will perform “very well” into 2011 and later, according to BMO Capital Markets.

“We’ve chosen copper as our No. 1 commodity, followed by iron ore, platinum, silver,” because of a “combination of strong demand, supply constraints,” Bart Melek, a BMO commodity strategist, said today on a conference call with reporters. The company also favors metallurgical coal, gold and oil, he said.

“Massive” fiscal stimulus programs in the U.S. and China are supporting metal demand, Melek said from Hollywood, Florida. The company forecasts global growth at 3.7 percent this year, compared with a drop last year. Industrial production will recover “quite smartly” and rise 3.2 percent worldwide in 2010, while U.S. factory output will jump 3.5 percent, he said.

The disastrous earthquake in Chile, the world’s largest producer of copper, reinforces a bullish view on copper, Melek said. The metal used in pipes and wires jumped to a seven-week high in New York after the magnitude-8.8 earthquake disrupted supplies. The effects on mines appear temporary, likely cutting 2010 production by less than 50,000 metric tons, he said.

A production surplus will reach about 111,000 tons this year, according to company forecasts, so a 50,000-ton reduction “means you can cut that surplus by half and make markets quite tight,” Melek said. “This is why we’ve seen copper prices move up significantly overnight.”

Source: Bloomberg, Reuters, BusinessWeek,

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