Metals sub-index rises as base metals firm up

The metal and mineral sub-index of The Bank of Nova Scotia’s commodity price index rose for the first time since July. Prices for nickel, lead, zinc, potash and precious metals rose in November, more than offsetting declines for copper and aluminum.

Nickel has rebounded from a low of US$1.82 per lb. in late September to US$2.40 in mid-December, a level sufficient to cover average Western World cash costs of US$2.20, reports economist Patricia Mohr.

The nickel price was boosted by Inco’s decision to cut its output by 60 million lb. over the next six months (equivalent to 5% of world supplies). The Russian delegation to the International Nickel Study Group has indicated that Russian exports of nickel scrap have virtually been halted, with Norilsk given the exclusive authority to export.

Mining problems have contributed to a 30% drop in estimated Russian exports in 1993. Though the Study Group indicates a surprisingly close balance between global supply and demand so far this year, consumption in Japan and Continental Europe is at risk in the first half of 1994.

Mohr believes nickel prices will probably average US$2.40-2.60 in 1994, up slightly from US$2.40 in 1993.

Zinc prices are expected to average US45-50 cents per lb. in 1994, compared with US43 cents in 1993.

Global mine output has been cut by about 10% over the past year, but smelters have yet to follow suit. Even if the European metal association co-ordinates a program to shut down high-cost smelters, it will take some time to absorb excessive global inventories, Mohr says.

Stocks currently represent 13.5 weeks of supply, compared with only 6.6 weeks in 1986 when zinc started to recover from the previous downturn. The metal and mineral sub-index was up 1.7% in November from October, and off by 9.6% from a year ago. The all-items index jumped 6.7% in November to a level 8.1% above that of a year ago.

The all-commodity index tracks export prices of various Canadian commodities, which are weighted according to their 1984 export values, except crude oil, for which the value of net exports is used.