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Scotiabank’s Mohr argues strong case for commodities now to 2020

Scotiabank's Patricia Mohr delivers a bullish stance on emerging markets and thus demand for commodities such as copper.

HALIFAX, NS (Mineweb) - 

Patricia Mohr, Scotiabank’s commodity market specialist, made the case for higher or resilient prices for commodities, including copper, potash and uranium, in the near and longer term.

Mohr, speaking on the last day of AME BC’s Roundup conference last week in Vancouver, grounded her views on increasing demand from emerging markets.

Potash price - Close or at bottom

Mohr noted food prices are high and “this is going to incent farmers to apply a lot of potash next spring, something we expect is going to happen.”

Vancouver free-of-board potash prices softened recently, she noted, but she said the soft spot probably put a floor on the price of potash. She pointed out that major potash customers have deferred buying and they would soon have to step it up again, with growth mainly coming from China and Brazil.

Uranium price - Fukushima overhang over

She forecast uranium prices, now languishing in the $40s per pound range, would rise to $60 to $65 per pound by mid-decade.

Three reasons for the renewed strength in the price of uranium were that: 1. Japan, which shut down reactors across the country following the Fukushima nuclear disaster, would bring reactors back online again; 2. demand from China would rise as it builds planned reactors; and 3. the U.S.-Russia Megatonnes to Megawatts program is to end, taking about 24 million pounds of U3O8 off the market.

Copper price - New basement

Mohr said that at current prices copper is “incredibly profitable” for producers, with strong demand in face of very little mine supply.

This year she pegged copper at $3.50; next year $3.30; and in the longterm $3 per pound.

She said increased mine capacity would bring down the copper price “a little” in the coming year, but ultimately argued that $3 is the new reality for copper as a basement price given high operating costs as mine grades drop and input costs increase.

Gold - Steady does it

“I think gold is actually in the process of consolidating,” Mohr said.

She didn’t see gold moving much higher this year as she argued the need to use quantitative easing, which many argue is a key factor in the gold’s price movements, in the U.S. would lessen as the U.S. economy improves, something she expects to happen this year and next.

Her forecast for gold was that it would edge up this year to around $1,725 an ounce, but that it would not hit $2,000 an ounce.

“Not for a while anyway,” she added.

Vision 2020 - Mohr Supercycle torque

It was in the longer term that Mohr was most bullish.

“I think in the second half of the decade we're going to have another big upswing in commodities and largely driven by ongoing strength in demand coming from the emerging markets," she said.

One statistic she likes to recount to Canadians, she said, is car ownership in China versus developed nations.

In the U.S. she noted there were near 800 cars per 1,000 people. In China the figure is a little less than 80 cars per 1,000 people.

The implication, of course, is that car ownership has quite a ways to grow as Chinese incomes rise.

Mohr pointed out that in recent years China has tripled the extent of its highway system in anticipation of such growing car ownership.