Metals sub-index off slightly in May

The metal and mineral sub-index of The Bank of Nova Scotia’s commodity price index declined in May for the fourth consecutive month. The index is almost at the depressed level of the mid-1980s.

Economist Patricia Mohr reports that although gold and silver prices continued to strengthen in May, most base metal prices have fallen well below average Western break-even costs (including depreciation).

London Metal Exchange (LME) nickel prices dropped to US$2.62 per lb. in May from US$2.71 in April and continued to fall in late June to US$2.42. Mohr says the price erosion reflects unwinding of technical positions on the LME and the overhang of large stocks of Russian nickel, which is often sold at discounts to LME prices of US$50 cents per lb. in Europe and US20 cents in the U.S.

Potential sales of Russian strategic stocks for hard currency dampened prices further in late June.

The metal and mineral sub-index was down 0.5% in May from April and off by 14.7% from one year ago. The all-items index declined by 8.6% in May to a level 4.4% below that of a year ago.

The all-commodity index tracks export prices of various Canadian commodities, which are weighted according to 1984 export values (except crude oil, for which the value of net exports is used).