Chichester Fund Favors Platinum, Iron Ore; Avoids Nickel, Gas

Jan. 4 (Bloomberg) -- Platinum, iron ore and coal will probably extend gains this year on strengthening demand, according to commodities hedge-fund firm Chichester Capital Management LP.

Nickel and natural gas may fall on rising supplies, said Uday Narang, who co-manages the Chichester fund with New York- based Julian Barrowcliffe. The fund returned about 53 percent in 2009. London-based Narang spoke in a phone interview.

For 2010, Narang’s top picks are platinum, iron ore, coal and copper, based on expectations that a U.S. economic recovery will reinforce demand from China and other emerging economies.

“The Asian emerging markets will take us higher. The U.S. is also coming out of recession. The worst in the U.S. is over, as we can see from industrial and economic data.”

Platinum may gain as much as 30 percent as demand expands from both the auto industry and jewelry buyers, Narang said. Iron ore and coal will probably rise by 20 percent to 25 percent, boosted by higher steel demand, he said. Copper, which more than doubled last year, can extend the rally by another 15 percent, he said.

“For copper, the Chinese are still buying. We’ve also got production issues at mines.”

Nickel and U.S. natural gas should be avoided in 2010, Narang said. Stockpiles of nickel tracked by the London Metal Exchange are at the highest since at least 1979.

“Nickel is doing well right now but there’s too much stock around. Nickel can fall 10 percent to 15 percent” this year.

“I’m not friendly to U.S. natural gas because of ample supply. As prices go higher, more LNG will hit the U.S. market.” Prices could decline 10 percent, he said.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net