METAL COMMENTARY — More inventory declines forecast for new year

Heading into December, in what amounts to a half-month of production, the metals industry continues to operate at reasonably healthy levels.

Growth in the short term is expected to be static, and prices will, more than likely, sideslip for the period. Market-watchers may also see a slowdown in the rate of inventory declines enjoyed throughout 1995.

Looking ahead to 1996, however, experts are forecasting further inventory declines, shortages and strong prices — especially in the cases of copper, lead and zinc, where producer supply is already tight.

The slower North American steel industry appears to be catching its breath as U.S. Dec. 1 ferrous plate and structural f.o.b. scrap prices remain stable at $140-145 per ton ($151 on Oct. 31). Stainless 304 remains around $1,050 per ton, with 316 unchanged at $1,350.

The following average prices and inventories on the London Metal Exchange (LME) pertain to November, with the previous month’s figures shown in parentheses (unless stated otherwise).

Prices for base metals are increasingly volatile. Optimistic forecasts for 1996, combined with low inventories, pushed nickel to US$3.86 (US$3.66) per lb. Inventories fell to 47,058 tonnes (51,372 tonnes at the end of October).

A further fall in African producer output, together with good consumer demand, pushed cobalt free-market quotes for Western A Grade ahead to US$32 (US$29.25 on Oct. 31).

Good battery sales around the world, as well as shortages at all supply pipeline positions, had the effect of pushing lead to US32.3 cents (US29 cents) per lb., as stocks fell again, to 165,425 (193,525) tonnes. (Seventy per cent of the available stocks are believed to be of lower-grade Russian origin.)

Steady demand for galvanized steel edged zinc ahead to US46.8 cents (US44.4 cents) per lb., as stocks fell to 685,475 (710,250) tonnes.

Tight physical availability raised copper to US$1.35 (US$1.28) per lb. in August. The 3-month forward average of $1.26 ($1.25) is indicative of strong backwardation. The combination of inventories on the LME and Commodity Exchange of New York rose again, to 222,427 (198,990) tonnes.

Spot molybdenum oxide prices are firm and unchanged at around $4 per lb., as oxide markets remain balanced. Moly scrap is sitting at $3.75, with ferro-moly hovering around $7.50 ($7) in tight supply.

Precious metals are steady on little real news.

News to the effect that consumption of the yellow metal continues to exceed production caused gold to nudge forward to US$385.21 (US$383.19) per oz., while, in quieter trading, silver eased to US$5.35 ($5.37) per oz.

Platinum group metals stabilized, with auto numbers steady but somewhat low. Platinum edged up to US$413.37 (US$412.94) per oz., while palladium fell to US$134.47 (US$137.09) per oz.

Rhodium remained weak, slumping to $290 per oz. (US$390 on Oct. 31).

— Jack Dupuis is an agent, broker and consultant specializing in the marketing of metals.