METAL MARKETS — Nickel producers contemplate cutbacks

In their anxiety to protect local currencies, governments are juggling interest rates which will, in the short term, further cramp economic recovery, particularly in Europe where companies will hedge almost all transactions until the crisis passes. The pickup in the U.S. continues slowly while the Japanese economy seems to have bottomed.

Rumors are rife that western nickel producers may soon announce cutbacks to their production plans with extended shutdowns at year-end. Inventories continue to climb, and demand, while expected to slowly improve, will take a while to whittle stocks to normal levels.

Russian nickel exports continue to disturb producers’ deliveries to European stainless steel mills. For the longer term, it will be interesting to see whether the former East Bloc can become the dominant nickel and aluminum supplier to Europe. If the former East Bloc is successful, western producers may have to permanently find other markets for their “evicted” products. Integrated producers’ efforts to maintain market share is already putting severe pressure on marginal nickel mines. Prices of stainless scrap have eased slightly but are unlikely to slip much further because of low generation. With August averages in brackets, average September LME cash nickel prices to date fell to US$3.15 ($3.298) per lb. as inventories rose slightly to 45,612 (43,302) tonnes.

About to test the intermediate term up-trend line, cobalt prices, affected by lower-than-anticipated production levels at African producers, poor demand and heavily discounted Russian exports ($14-15 per lb.), eased to US$17.75 per lb.

Base metals remained firm but quiet pending further economic news. LME cash prices for copper eased to US$1.102 ($1.141) per lb. as LME and Comex inventories rose to 334,788 (304,157) tonnes.

Zinc markets were steady with LME average prices ahead slightly to US62.4 cents (61.7 cents) per lb. and stocks also up to 357,975 (349,225) tonnes. LME lead prices eased to US28.5 cents (29.6 cents) per lb. as stocks rose again to 165,075 (154,825) tonnes.

Continued unrest in South Africa and currency apprehensions supported precious metals markets. Contrary to some outlooks within the industry, the price charts suggest, at least in the short term, a turnaround in platinum, which rose to US$361.71 ($359.82) per oz., and in palladium, which rose slightly to US$90.47 ($85.54) per oz.

Gold was steady at US$344.99 ($343.60) per oz. but silver continued its fall on news of investor sales to US$3.74 ($3.82) per oz.

— Jack Dupuis is a minerals marketing consultant based in Thornhill, Ont.