Barclays favours nickel in 2014, bearish on gold and oil – by Barani Krishnan (Reuters U.K. – December 10, 2013)

NEW YORK – (Reuters) – Base metals, led by nickel, appear set to trend higher in 2014 due to tighter supplies, while unfavorable economics should keep pressure on gold and oil and prompt investors to avoid much of the commodity complex, Barclays said on Monday.

In another negative outlook on commodities from a major investment bank, London-based Barclays PLC (BARC.L) said that outflow of money from the sector will not end soon, at least not in the first quarter.

It cited a litany of reasons, including comfortable supply levels in most raw materials; a still-sluggish global economy and the likely scaling back of the Federal Reserve’s stimulus that had supported commodities.

“It is unlikely investors will warm to commodities in the near term,” said Barclays, which until a few years ago was one of the biggest proponents of the sector. Goldman Sachs (GS.N), often regarded Wall Street’s most authoritative voice on commodities, and Citigroup (C.N) have issued similarly sanguine outlooks in recent weeks.


Smaller stockpiles has base metals better positioned for gains than other commodities when the new year begins, with nickel in particular due to a planned export ban by Indonesia, Barclays said.

“Most base metals have been stuck in structural surplus to a greater or lesser degree since 2007/08 after what was one of the strongest-ever periods of supply growth. However, 2014 is likely to mark the end of this phase.”

Nickel hit a one-month high on the London Metal Exchange on Monday, closing up 1.4 percent at $13,955 a tonne.

Barclays said it expects the metal to average $14,750 in the first quarter and above $15,000 for the rest of the year as the Indonesian ban potentially deprives the Chinese nickel-pig iron sector of crucial raw material.

“There remains some uncertainty over how strictly this ban will be implemented. Even if it is not, nickel prices are so low,” it said. Nickel is down 18 percent so far this year.

Barclays said it expected aluminum and lead supplies to turn into a deficit in 2014, and zinc’s surplus inventories to shrink dramatically like nickel’s. It forecast modest supply growth in copper, the most-widely traded base metal.

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