The commodity price index of Scotiabank dipped slightly in June from the previous month. A pickup in the metal and mineral and oil and gas sub-indexes was offset by a decline in the forest product index and seasonally weaker agricultural prices.
The all-items index stands 17.6% above one year earlier, “underpinned by signs of recovery in Europe, strength in the U.S. economy and ongoing interest by New York investment funds,” writes bank economist Patricia Mohr. The metal and mineral sub-index was up 3.7% from May and is ahead 14.6% from 12 months ago. Copper prices, trading at US$1.14 per lb. in late July, are well above Western World break-even costs averaging 81 cents. Prices of lead, aluminum and molybdenum are also up; the price of zinc remains weak. Mohr says global copper consumption will exceed supplies in 1994 for the first time since 1991. Demand for the red metal has surged in the U.S. alongside record motor vehicle and strong magnet wire production. European consumption is also higher.
Mohr cautions that “supply-side tightness will probably be alleviated in the coming year by mine expansion in Chile, Australia and the U.S., re-opening of relatively high-cost British Columbia mines and a pickup in CIS exports.” 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).
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