Tougher times ahead for metals markets

It wasn’t the best of years in 1990 for metals prices, but it wasn’t the worst, either. After the heady times of the late 1980s, precious and base metals began feeling the effects of a softening economy and reacted accordingly. Precious metals, in particular, took it on the chin in 1990. Of the major base metals, copper fared the best; it alone closed higher at the end of 1990 than at the end of the previous year.

Gold started the last decade on a high note and remained a well followed metal throughout those years. Global supplies seemed to go on a rampage during the 1980s as new means of financing and new processing methods gained wider acceptance. The stock market seemed ever onward and upward, with investors enjoying the longest bull market on record.

What the new decade will likely bring gold is a slowdown, at least on the production side. By the mid-1990s, global output could be on the downswing, in no small part because of the rising costs of production. It is also believed by many that the market will need time to digest all of the accumulated mine output.

Gold’s “poorer” cousin, silver, would probably like to forget 1990. The silver price dropped below US$4 per oz. for the first time in 14 years. An industrial metal more than anything else, silver may be poised to stage a turnaround, if only because it is relatively inexpensive compared with other metals.

The world’s platinum supplies are controlled by South Africa and the Soviet Union, and neither nation enjoyed a banner year in 1990 in terms of price for the commodity. However, platinum (and palladium and rhodium) seems almost assured of market success this decade because of its ability (as a component in the manufacture of autocatalysts) to render automobile emissions environmentally safer.

London-based Metals & Minerals Research Services reported base metal prices slipped by 21% in real terms last year. A further decline is projected for 1991 as demand in general falls.

Copper, as noted above, enjoyed a fair year in 1990, thanks in no small measure to supply disruptions. With new mine capacity, particularly in Chile, coming on stream this year, the price of the metal is not expected to retain the strength exhibited last year.

Labor problems had an effect on the supply of lead in 1990, which performed well in the first half but sank in the second half. Some price weakness is predicted for the metal this year. Batteries represent lead’s major application, and one area to watch as the decade unfolds is the development of the electric car, which could have a positive effect on lead’s future.

In the short term, nickel is set to suffer from tight supply conditions and falling demand. For the decade, however, a more positive outlook is projected, if only because producers have moved to eliminate excess capacity.

Zinc producers have had little to complain of the past few years but the higher prices experienced may work to the detriment of the metal by reducing demand. The galvanizing sector may represent zinc’s best bet for future growth.