According to Goldman Sachs JBWere Pty, metal and coal prices are expected to average "considerably lower" in 2009 as demand plunges in a global recession and producers can"t cut supply fast enough.
Analysts led by Mr Malcolm Southwood in a note to clients said that prices of coking coal may plummet by 60%, copper by 40% and aluminum by 28%.
Commodity prices dropped 36% last year as a global credit crisis curbed demand and pushed the world economy into a recession. Mining companies including Rio Tinto Group, Alcoa Inc. and Aluminum Corp. of China Ltd. have slashed production.
The analyst said that "With gold the most plausible exception, we expect 2009 annual average commodity prices to be considerably lower versus 2008, with negative implications for resources sector earnings. We expect global off take of most metals and minerals to contract this year."
The brokerage said that there will be oversupply of aluminum, copper, nickel and zinc and bulk commodities will also move into annual surplus in 2009.
Goldman said that China, the world"s largest consumer of metals will hold the key to sentiment on commodities this year. Demand from China is expected to be very weak in the first half, improving in the second half driven by stimulus spending and as de stocking runs its course.
China plans to spend CNY 4 trillion (USD 586 billion) to support sagging growth by investing in metal-intensive projects including railways and homes.