While it didn’t provide the unremitting gloom of the years immediately following the Asian economic crisis, 2000 might be remembered by many metal producers as the year of the recovery that never was.
Most forecasts were optimistic, as the industrializing countries in the Pacific Rim were showing signs of recovery and the large economies of the North Atlantic countries were buoyant, not least because of a booming U.S. stock market. The reality was disappointing, as the good times in the financial markets turned and the industrial-growth economies found the road back to prosperity rougher than many seers had imagined.
The year saw prices for all the main industrial metals decline slightly, but over the year, most maintained averages that were comfortably above their dismal prices in 1999.
Demand for nickel did strengthen over the year, but production increases kept up, so the market remained in a slight undersupply. With that came a continued drawdown in above-ground nickel stocks, which showed as stocks in London Metal Exchange warehouses declined to below 10,000 tonnes — well off the 47,682 tonnes at the beginning of the year, and the lowest levels seen since 1992.
Base metal de-stocking
Another metal that saw brighter times in 2000 was copper, which finished the year at US$1,808.50 per tonne, only a US$26.50 decline on the year. After averaging US$1,570 in 1999, the red metal was in much better form, and — like nickel — it saw significant de-stocking over the course of the year, with LME warehouse stocks less than half what they were at the end of 1999.
Copper’s price peak came in September as it hit US$2,009 per tonne. Zinc was also at its strongest in September, touching US$1,277 per tonne on its way to a year-end price of US$1,021. The year wasn’t as kind to zinc as it was to the other metals, and certainly didn’t live up to the predictions as zinc’s breakout year. Still, 1999 saw a steady decline in the above-ground zinc stocks, although the commodity’s mainstay, the automotive industry, looks to be heading for a lean 2001.
Similarly, aluminum is leaving 2000 around US$1,560 per tonne, down substantially from its January level around US$1,615. LME warehouse stocks of aluminum are, like those of copper, less than half their January level, but with the automotive sector bracing for bad news, the most car-sensitive commodities are feeling the pain in advance.
Likewise lead, although the grey metal is nearly alone in having had an even worse ride in 2000 than in 1999. The year-end price, US$471 per tonne, is not that much lower than at the start of the year, but lead’s average price will not meet its 1999 level of US$502.
Gold sales predictable
Gold spent most of the year in an apparently inexorable downward slide, despite two sucker rallies, one in February and one in early June. This year, gold only broke the US$300-per-oz. barrier for a 2-week stretch in February, and has been headed down more or less steadily since reaching US$290 in mid-June. The fundamentals of the gold market remained much the same, with central-bank lending continuing to depress the market for physical gold far more than central-bank sales ever did.
Central banks sold about 324 tonnes of gold in the first half of the year, a tenfold increase over the first half of 1999. Yet the price was actually up a modest US$5 per oz. while that gold was being unloaded, compared with a decline of US$30 or so in the first six months of 1999.
The sales had less of a psychological effect than those of previous years, which often moved the market only after they had been completed and announced. The difference appears to be that in the past year the banks have been more discreet about announcing their sales — and that the disposal of gold by European central banks bound by last year’s Washington agreement to limit gold sales is something that has already been effectively priced into the market.
The Bank of England’s regular program of gold auctions — also governed by the Washington statement — at least has the virtue of predictability, and the auction results have generally not shown much impact on the gold price except in the day or two following. This stands in marked contrast to their effect on the market in October 1999, for example, when a heavy oversubscription and a surprisingly strong allocation price spooked the gold market back over US$300 per oz., however briefly.
The Bank has auctions scheduled for early 2001; the exact dates will be announced in January and March.
Sales of scrap gold — up 17% in the first half of the year, according to industry think-tank Gold Fields Mineral Services (GFMS) — are a definite indicator of poor market sentiment, representing de-stocking by the jewelry trade, the industry’s principal industrial consumer.
In that price environment, one could be forgiven for thinking some suppliers might shut their doors. But — on balance — the falling price hasn’t been attended with heavy production cuts; GFMS is projecting a net decline of 0.5% in annual production, just enough to register as the first decline since 1994.
All that is not to say that gold producers have not been shutting down; mine closures, especially in the U.S. and Latin America, have been rife this year. But new mines — generally lower-cost mines, too — have come on-stream at about the same rate.
PGMs rise
The platinum group metals (PGMs) had another strong year, with the same old song — insecure Russian supplies, and a counterpoint of steady industrial demand — playing in the background. A year that started with platinum at US$443 per oz. and palladium at US$444 saw both metals climb steadily — with platinum breaking above US$600 and palladium above US$900 by the end of the year.
That kind of strength in the metal market translated into action among Canadian junior explorers, who have seized on the PGMs as the one sexy commodity to show the retail market. The most intense action centred in Ontario’s mid-north, where
Silver closed the year in the US$4.50 range, down from US$5.30 at the end of 1999. Supply outpaced demand for much of the year, and indications are that the glut will continue into 2001.
Cobalt spikes twice
Among the alloy metals, cobalt, as usual, offered the best thrills for market-watchers. Unpredictable Russian and Central African supply, the metal’s main source of boogie, caused prices to shoot up to US$17 per lb. in April and US$17.50 in September.
Uranium also stayed on its downtrend, with the price of a pound of U3O8 crossing the US$9-per-lb. line in April and heading down to US$7.10 per lb. by year-end. Even radically increasing fuel prices couldn’t soften the blow, suggesting that electrical utilities may yet be in for unpleasant surprises over the next year or two.
Rare metal buzz
Tantalum prices went into orbit near mid-year, and at US$180 per lb. for Ta2O5 — with some trades as high as US$240 — they look to be reaching escape velocity. Cousin Niobium also moved up, with Nb2O5 concentrates generally in the US$6-per-lb. range.
The principal beneficiaries of the tantalum buzz were
Apart from the sharp rise in tantalum prices, the narrow world of the minor metals stayed fairly calm in 2000. The most interesting activity came in antimony, where capricious supply from the main producing nation, mainland China, pushed prices into the $1,500-per-tonne range for much of the year.
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