Commodity index rises slightly (July 13, 1992)

The metal and mineral sub-index of Scotiabank’s commodity price index edged up in May as firmer zinc prices offset weaker prices for nickel, gold and aluminum.

The sub-index helped the all-items index rise by 0.4% in May from April. Economist Patricia Mohr says the all-items index is almost 5% above its cyclical low last September, and is marginally below its level of one year ago.

Mohr reports that metal prices were mixed in late June. “Copper at US$1.11 per lb. and zinc at US61 cents per lb. are profitable, while aluminum prices at US60 cents per lb. and nickel at US$3.40 per lb. are at or below average western world break-even costs,” she writes.

Not counting forward sales, copper and zinc prices are yielding higher profit margins than gold (which has been trading in the range of US$335-345 per oz.), Mohr says.

A moderate economic improvement in the U.S. has helped some base metals but Mohr suggests the effects are being outweighed by a softening Japanese economy. She says Japanese stainless steel production has declined (and also some sales of Russian nickel shipped to western Europe have been sold below LME quotes).

Zinc, on the other hand, has been helped by an improvement in U.S. galvanizing demand from automakers. Mohr says Japan accounted for 25% of western world nickel demand in 1991 but only 16% of zinc.