Commodity index in seasonal decline

Commodity prices drifted seasonally lower in early summer and helped to pull down the Bank of Nova Scotia’s commodity price index by 2% in July. Gains in the metal-and-mineral and oil-and-gas sub-indexes were offset by declines in the agricultural and forestry sectors.

The all-items index remains 15.4% ahead of where it was a year ago. The metal-and-mineral sub-index, which gained 1.8% from June, rose as gains for base metals offset softer prices for precious metals. The sub-index is 15% higher than a year earlier.

Late August saw industrial metal prices ease. Nickel prices, for example, were running at US$2.69 per lb., down from an average June-July price of US$2.84. Current nickel prices remain above break-even costs for many Canadian operations.

Nickel inventories on the London Metal Exchange remain high. “Western world consumption will probably grow by a solid 4.5% in 1994,” writes economist Patricia Mohr, “with particularly strong European stainless steel exports to the U.S. and the Far East more than offsetting flat Japanese consumption. “However, supplies may exceed demand in the second half of the year as Russian exports rebound and mining companies expand production.” The all-commodity index tracks export prices of various Canadian commodities, which are weighted according to their 1984 export values (except crude oil, for which the value of net exports is used).