Metal prices boost index (November 14, 1994)

A surge in the metal and mineral sub-index in September helped to push the Bank of Nova Scotia’s commodity price index higher. The all-items index rose 0.6% in September from August; it sits 10.4% higher than one year earlier.

Economist Patricia Mohr says the surge in base metals, which continued through October, reflects U.S. investment fund buying that was triggered by substantial year-over-year gains in G7 industrial activity and signs of a turnaround in Japan.

The metal and mineral sub-index rose 4.9% in September; it is 26.4% ahead of its level of one year ago.

Copper prices soared past US$1.20 per lb. in late October. Zinc prices, which have lagged the overall recovery, rose to US50 cents per lb. late in October. The price of nickel, which at US$3.30 per lb. is profitable for Canadian producers, could trigger a large increase in global supplies next year, Mohr says.

In the U.S., overall consumption, which rose by 16% during the first half of the year, was boosted by strong single-family residential construction and automobile assembly. German demand has been pushed up by rising capital goods exports to the U.S. and the Far East and inventory replenishment. Wirerod orders from Germany have also picked up since mid-year. The net result: significant stock reduction on both the London Metal Exchange and the Commodity Exchange of New York.

The all-items index benefited in September from not only higher metals and minerals prices but stronger agricultural prices, they offset weaker energy prices and a temporary decline in the forest product index.

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).