METALS MARKETS — Companies work to reduce costs

Metals markets continue to be roiled by conflicting economic reports. Amid the lingering recession, quiet consumer demand and growing inventories, miners and manufacturers are attempting to optimize production to reduce costs and stay in business.

The rationalizing of the stainless and carbon steel industries in the U.S. and Europe is proceeding with shutdowns, mergers and buyouts announced daily. Several companies have announced production curtailments in the form of extended summer shutdowns of about 5% of annual capacity. This approach works if all the majors co-operate with similar moves. Otherwise, those making the cuts are allowing others to optimize production and increase market share. A drop in Russian cobalt shipments and the first monthly sales from the U.S. national stockpile by the Defense Logistics Agency kept prices firm. March cobalt prices (with February values in parentheses) are as follows: $16 ($16) per lb. for western brands, $14 ($13) for Russian and $18 ($18) for producers. Nickel markets are steady on reports of a slowdown in Russian official and unofficial exports, which is possibly caused by seasonal weather and by ice affecting shipping. Continued improvements in stainless steel mill production and tight stainless scrap prices added to the good news.

On a negative note, Falconbridge, perhaps impatient with a lack of similar moves by producers outside North America, reduced its proposed 10-week summer shutdown to two weeks.

Several producers have revealed increased output in 1992 over 1991 and plan to raise output again in 1993. The London Metal Exchange (LME) price for nickel in March is down slightly to $2.705 per lb. ($2.74) as LME inventories rose to 86,538 tonnes.

As a result of producer cutbacks, slowly declining inventories and some improvement in demand, molybdenum oxide remained steady at $2.10 ($2.14) per lb.

About to test a possible resumption of the long-term price decline, LME cash prices for copper dropped to US97.7 cents ($1.002) per lb. as LME and Comex copper inventories rose smartly to 450,076 tonnes.

Lead markets continued to be quiet with LME prices at US18.4 cents (18.1 cents) per lb. as stocks were up again to 245,425 tonnes.

Despite some cutbacks by zinc producers, LME cash prices were off to US45.3 cents (48.6 cents) per lb. as stocks surged again to 595,825 tonnes. Precious metals are mixed. Platinum prices initially weakened when it was announced that a non-platinum autocatalyst for automobiles would be evaluated (a possible one-to-two-year undertaking). The announcement that Rustenburg would close one mining area, affecting some 3% of world production, provided support, and prices recovered some of their loss to bring the March average to US$348.72 ($359.13) per oz.

Palladium softened to US$105.34 ($110.44) per oz. and rhodium was steady at US$1,400 ($1,400) per oz. Despite selling by central banks and producer hedging, investor interest (perked by rising currency and inflation unease) kept gold at US$329.22 ($329.31) per oz. and silver at US$3.62 ($3.66) per oz. — Jack Dupuis is a minerals marketing consultant in Thornhill, Ont.