METALS MARKETS — World metals consumption languishes

In all markets, metals consumption continues to languish among members of the Organization for Economic Co-operation and Development.

In Japan and Europe, the main consuming areas such as commercial construction and auto manufacturing show little sign of improvement. With large reserves and a favorable balance of trade, Japan is implementing a massive public works program. Meanwhile, European Community governments are considering assisting their carbon steel sectors, which are beset by falling exports, low demand, subsidized overcapacity, and an influx of cheaper east bloc material.

Conditions are marginally better in North America, where an improvement seems under way.

While governments are officially trying to maintain low interest rates to encourage their economies, as a group they have been implementing trade barriers and domestic tax increases which are discouraging industry and, more importantly, consumption.

The serious, sudden growth of gray market sectors and attendant smuggling, which decrease tax revenue, are further skewing economic reporting. Total tax levels that take more than 50% of available income do not seem to be sustainable without considerable resentment, flight of capital, inflation, and/or high unemployment.

Cobalt prices continue firm, supported by events in Zaire and in Russia where metal exports have slowed. With February cobalt values in parentheses, March prices are as follows: Western brands, US$16 ($16) per lb.; Russian, US$14 ($13); and producers, US$18 ($18).

Nickel markets are firmer as a result of improved stainless steel mill production and tight stainless scrap at prices of $725 per long ton, with nickel values contained at about US$2.60 per lb., just under the price for virgin metal. Average-to-date March nickel is down slightly to US$2.695 ($2.74) as a result of inventories having risen to 85,530 tonnes (83,028 tons).

With more producer cutbacks, molybdenum oxide is steady at US$2.10 per lb. ($2.14) in quiet markets.

London Metal Exchange (LME) cash prices for copper fell to US97.1 cents ($1) as LME and Comex copper inventories rose slightly to 436,516 tonnes (432,282 tons).

Lead prices are unchanged in quiet LME trading at US18.6 cents (18.1 cents) as stocks were up slightly to 237,300 tonnes (234,325 tons). Battered by surging inventory levels, cash prices for zinc were off to US45.4 cents (48.6 cents) as stocks surged again to 579,575 tonnes (554,600 tons). Precious metals are generally softer in response to mixed news. Slow auto and jewelry sales and news of an upcoming test on an all-palladium catalyst combined to decrease platinum prices to US$345.44 ($359.13) per oz. Palladium also softened, to US$104.40 ($110.44) per oz. Prices for rhodium, the other catalytic converter metal, fell steadily in February to US$1,400 per oz. at month’s end from $1,800.

Central bank selling, producer hedging, and declining investor interest eased gold to US$328.05 ($329.31) per oz. and silver to US$3.59 ($3.66). — Jack Dupuis is a minerals marketing consultant in Thornhill, Ont.