Scotiabank’s metals sub-index shows slight improvement

The metal and mineral sub-index of Scotiabank’s commodity price index moved up marginally in January as a slight improvement in copper and nickel prices offset declines in lead, gold and silver prices.

Zinc prices remained weak in late February at US48 cents per lb. This price is just above average Western world cash costs of US45 cents, but well below break-even costs of US53 cents.

Economist Patricia Mohr notes that although the market received some support from announced mine/smelter production cutbacks in Canada, Australia and Mexico, further cuts are required to boost prices. Mohr adds that a rise in the demand for zinc will be hampered by large London Metal Exchange stocks and declining Western world consumption.

Mohr says mining companies using custom smelters will be squeezed over the next few months by low metal prices and higher treatment charges. The metal and mineral sub-index was up 0.6% in January from December and off by 5.3% compared with one year ago. The all-items index rose by 4.4% in January to a level 7% above a year ago.

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

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