METALS COMMENTARY — A mood of optimism underpins metals markets

The third quarter of each year is a time when companies traditionally prepare operating budgets for the coming year, a task that this year is not being made easier by the complex state of world metals markets. Typically, companies make their forecasts based on all known market conditions, and projections made by industry experts. But, at times, the waters are muddied by the opinions of government and certain self-interested, consuming industries, making it even more difficult for companies to make long-term predictions with any accuracy.

In the metals markets, most experts will remain extremely bullish, at least for the next two years. This optimism is based on surging demand and, except for copper, a lack of new capacity which can be brought on stream in this period.

The prices quoted below refer to this month’s average-to-date, unless noted otherwise, with the previous month’s figures shown in parentheses.

Steel mills experienced a decline in orders as distributors reduced stocks in September and October. By the beginning of November, U.S. ferrous plate & structural scrap prices eased to $140-145 ST ($151 on September 31). Stainless 304 edged down to hover around $1,040 -$1,060 ($1,100-$1,125) and 316 $1,350 – $1,400 ($1,425-$1,450).

In base metals, sharply rising LME prices reflected the continuation of the long decline in inventory levels and general optimistic forecasts by industry experts. Forecasts of significant deficits between supply and demand for the next two to three years, coupled with slightly higher stainless sales, pushed average-to-date November LME nickel prices to US$3.988 lb. (US$3.658 average for October) as inventories fell to 50,574 tonnes (compared with 51,372 tonnes at the end of October).

Reports of producer sold-out positions and available stocks held in strong trader hands, plus good consumer demand, pushed cobalt free-market quotes for Western A Grade ahead to US$30.50 (US$29.25 on October 31) per lb.

Steady battery sales continued to support lead prices at US31.5 cents (US29.0 cents) per lb. as LME stocks fell again to 192,525 (193,525) tonnes.

In sympathy with other base metals, LME zinc prices rose to US47.3 cents (US44.4 cents) per lb. as LME stocks fell to 705,250 (710,250) tonnes.

Because of some increased supply and firm demand, average August LME copper prices weakened and then recovered to US$1.335 (US$1.276) per lb. The combination of inventories on the LME and Commodity Exchange of New York rose again to 207,056 (198,990) tonnes.

Spot molybdenum oxide prices firmed at $4 lb. ($3.80) as markets remain balanced. Moly scrap is around $3.75 and ferro-moly hovered around $7.50 ($7).

Precious metals remain quiet with little news. Average-to-date October gold sat at US$382.50 (US$383.19) per oz. Silver was also lacklustre, easing to US$5.33 ($5.37) per oz. in October.

Platinum group metals reacted to slowing auto numbers, and softened again. Average-to-date October platinum prices slid to US$407.50 (US$412.94) per oz. Palladium fell to US$135.96 (US$137.09) per oz. Rhodium slumped to US$330 in early Oct. and then recovered to US$390 per oz. in early Nov. (US$390 on Oct. 31).

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