METALS COMMENTARY — Simmering demand heats up industry

Normally, the summer holiday season is a quiet one for metals markets, but this summer is proving less quiet than most.

Many customers of the mining industry are being met with an unusual challenge: trying to meet customer demand by either staying open during the holiday period or recalling some personnel to maintain at least limited shipments.

Although the most visible beneficiaries of this trend are the North American automobile companies and their suppliers, the benefits extend to a host of other sectors as well.

While rising interest rates appear to have slowed the housing market, consumers nonetheless seem intent on satisfying several years of pent-up demand. Even the long-anemic aerospace sector is receiving increased orders. And in the tool sector, double-digit increases are signalling rising sales of plant equipment, with a sustained pick-up apparently well under way. In base metals, strong demand continues to place pressure on available supplies, and this will, at best, slowly push prices ahead.

The following prices and inventories of the London Metal Exchange (LME) are for July, with the previous month’s figures shown in parentheses. Steady demand and the streamlining of Russian delivieries to steel mills are holding nickel steady at US$2.825 (US$2.85) per lb., as inventories sit at 133,344 (132,498) tonnes.

Meanwhile, low demand and U.S. government stockpile sales continue to keep a lid on Western cobalt prices, which eased slightly to US$22.50 (US$24) per lb. Russian products are sitting at US$19 (US$20) per lb.

Ever-stronger physical demand and renewed investor activity pushed lead to US26.3 cents (23.8 cents) per lb., with stocks up slightly to 356,425 (354,725) tonnes.

While physical demand for zinc is improving, poor fundamentals have delayed any significant improvement as the metal traded narrowly at US43.7 cents (US43.8 cents) per lb. and stocks crept up again to 1,214,075 (1,196,850) tonnes.

Extremely tight physical markets spurred copper ahead to US$1.115 (US$1.072) per lb., as the combination of inventories on the LME and the Commodity Exchange of New York fell to 372,017 (386,394) tonnes.

Rising steel demand and the attempt by buyers to lock up fourth-quarter tonnages bumped molybdenum oxide to US$3.50 (US$3.15) per lb. Precious metals, meanwhile, continued their lateral movement, unperturbed by relatively large currency realignments and supported by only steady physical demand. Gold was again unchanged at US$383.88 (US$385.71) per oz. and silver retreated to US$5.28 (US$5.39) per oz.

Persistently strong auto sales fueled platinum group metals as platinum rose to US$411.17 (US$401.38) per oz., palladium jumped ahead to US$145.99 (US$136.19) per oz. and rhodium moved up to US$810 (US$790) per oz. — Jack Dupuis is a metals agent, broker and consultant specializing in the marketing of mining properties.