Metal prices push commodity index down

Sliding metal prices had a negative effect on Scotiabank’s all- commodity price index in December, which was off 0.8% from the previous month. The all-items index has fallen 9.5% in the last year.

Economist Patricia Mohr said the metal and minerals sub-index, off 3.2% in December, has dropped by 24% from its peak in January, 1989, and is currently at late-1987 levels. “Prices are still comfortable relative to average production costs,” she said, “but profit margins will be squeezed substantially.”

Nickel prices at just under US$3 per lb. remain above break-even costs: US$1.90-2 for Canada’s lowest-cost producer and US$2.50 (average cost) for the non-communist world.

Mohr said nickel’s price slide from US$8 a year ago reflects a massive inventory correction by stainless steel distributors in the U.S., western Europe and Japan, causing a sharp decline in global steel output.

In Japan, she said, stainless steel mills cut output by 15% in the fourth quarter of 1989 and plan to hold production at this lower level during the fir st half of this year.

The all-commodity index tracks export prices of a variety of Canadian commodities, which are weighted according to their 1984 export values, except crude oil where the value of net exports is used.