Precious Metals, Nickel Top Commodity Pick at Morgan Stanley

(Bloomberg) -- Precious metals are top of Morgan Stanley’s commodity picks with nickel its preferred base metal, as the bank remains a “patient bull” on raw materials despite recent price declines.

Acknowledging that “price signals have stalled,” analysts including Tom Price and Susan Bates said bullish forecasts remain dependent on a large, long-term infrastructure rebuild in the U.S. and China’s credit support for “the mature phase of its materials-intensive growth cycle,” according to a report dated March 13.

The bank follows Goldman Sachs Group Inc. in maintaining a positive outlook on commodities, even amid a setback this year for prices due to concerns over Chinese demand.

Uncertainty over the rapid roll-out of trade and immigration policies in the U.S. is supportive for gold and silver, Morgan Stanley said. Still, it’s a longer-term bear on the metals due to “stable global growth and proactive inflation management.” Palladium will be supported in the short term by a lack of commercial inventories and persistent deficits, the bank said.

Nickel will be buoyed by restocking from stainless steel producers, while the Philippines’ controversial mining review continues to offer support, offsetting Indonesia’s back-flip on allowing exports of ore, Morgan Stanley said.

The bank said it remains a “steadfast” bear on bulk commodities such as iron ore and coal. Iron ore supplies from Vale SA’s S11D mine in Brazil and Gina Rinehart’s Roy Hill mine in Australia will cap prices, given China’s current rate of steel output, the analysts said. While it raised its iron ore forecast for 2017 by 29 percent to $74 a metric ton, that’s still well below Metal Bulletin Ltd.’s current benchmark price of around $88.

Palladium for immediate delivery has climbed 11 percent this year to $755 an ounce, and is the best performer among the four precious metals, while nickel is little changed at $10,145 a ton.

To contact the reporter on this story: Ranjeetha Pakiam in Singapore at rpakiam@bloomberg.net.

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, James Poole