Member nations of the Organization for Economic Co-operation and Development are wallowing in a mixture of high interest rates and artificially low inflation, deficits and unemployment. All the while, raw materials and manufacturing sectors are deriving strength from shortages and price pressures.
Most metal-consuming sectors are operating on a hand-to-mouth basis. Stuck with prohibitive payroll taxes and other user fees, producers are loath to hire new workers and, consequently, ill-prepared to cope with surges in demand. Environmental approvals can delay new projects for months and years, and industrial interference, such as the Basle Treaty, is having an adverse effect on recycling costs.
Canada was among the first to sign this treaty, according to which certificates of approval are required for certain transfers of waste. Industry is naturally discouraged when such difficulties are encountered. The U.S. has refused to sign it without modifications.
Elsewhere, international metal markets seem oblivious to the financial chaos swirling ’round them. Metal-buying in Japan is surging in spite of a looming bank and liquidity crisis, steady bond-selling in the U.S. and an uncompetitive smelter industry.
The following average prices and inventories of the London Metal Exchange (LME) are for the month of June to date, with the previous month’s figures shown in parentheses (unless stated otherwise).
News of producers turning away new business in preparation for summer shutdowns pumped nickel to US$3.51 per lb. (US$3.28 in April), as inventories fell to 98,676 tonnes (compared with 104,484 tonnes at the end of May).
Quiet markets characterized cobalt free-market quotes for Western A Grade at US$28 per lb. (US$28.50 on June 1). Russian ingot was selling at $26.75 per lb.
Reports of a doubling of Japanese imports to date in 1995, attributed to currency-based buying, kept lead steady at US27.5 cents (US27.1 cents) per lb. as stocks fell again, to 257,475 (262,350) tonnes.
Some slipping of producer premiums in North America to 7 cents from 8 cents, combined with firm demand from the steel-galvanizing sector (which represents 50% of consumption) and strong Japanese intake, slowed the decline of zinc. Prices fell to US45.9 cents (US47 cents) per lb. as stocks dropped to 869,675 (897,500) tonnes.
Although the combination of copper inventories on the LME and Commodity Exchange of New York rose to 215,190 (206,536) tonnes, LME prices spurted to US$1.31 (US$1.26) per lb.
Meanwhile, balanced markets steadied molybdenum oxide spot prices, which remained around US$7-8 per lb. (unchanged since the end of May). Precious metals remained unusually quiet.
Unperturbed by reports predicting more sales by the central bank and the International Monetary Fund, gold sat at US$385.08 (US$385.23) per oz. And silver, trading narrowly after its tumble in May, averaged US$5.33 (US$5.54) per oz. — still well ahead of recent lows.
Platinum goup metals also traded quietly, with platinum falling to US$433.85 (US$437.39) per oz. and palladium slipping to US$157.34 (US$160.68) per oz. Rhodium, at US$555 (US$470) per oz., held on to its gains of recent weeks.
— Jack Dupuis is a metals agent, broker and consultant specializing in the marketing of metals.
Be the first to comment on "Metals Commentary — Physical metal markets flex muscles"