Investing in minor metals? Buyer beware

We continue to hear from investors who own small amounts of highly pure indium and germanium, purchased over the past few years at prices up to US$70-80 per oz.

Reuters recently reported that indium is still being telemarketed from the Toronto area to North Americans for its fast-growing usage and long-term profit. However, potential buyers are cautioned about such proposals, as current quotes for these metals are nowhere near the indicated selling prices. According to Metal Bulletin’s Nov. 1 quotes, the current price for indium is US$145-170 per kg (or, at 32.150737 oz. per kg, about US$4.51-5.29 per oz.). Germanium is US$340-350 per kg, or US$10.58-10.89 per oz. The price varies, depending on quality and quantity. Typical commercial quantities are 50-kg lots.

Sellers of relatively small investment quantities of these metals can experience several problems. Customers are few and hard to locate, and most producers do not wish to buy material they have already sold. If the owner has taken physical delivery of the metal, a purchaser will usually require an assay certificate and can reasonably request a check assay after delivery and before payment to confirm authenticity.

Unless they are experienced in such ventures, investors who wish to buy metals should select only those that are publicly traded and quoted on one of the exchanges. Additionally, they should arrange through a reputable agent or broker to store the purchase until its sale is desired. Several banks will buy, sell and store some metals for clients, avoiding any doubts and costs regarding assay certification.

In base metals, the growth of inventories on the various public exchanges appears to be slowing as producers begin to grapple seriously with rising losses and reluctant shutdowns.

Governments are also beginning to take more interest in the metal-consuming sectors. Reuters carried a story to the effect that Russia cannot afford, and will not act, to stem the 1.5 million tonnes of aluminum per year being exported to the West. This month sees the end of the European Community’s 3-month quota of 60,000 tonnes on aluminum from the Commonwealth of Independent States (CIS) and, without reaching any understanding, another quota imposition seems likely. If implemented, it will divert additional material to the exchanges and eventually other markets, such as the U.S. or Japan. Elected officials in the U.S. are soliciting legislative support to head off further plant shutdowns attributed to several CIS-sourced metal imports.

In the nickel market, several factors — a smelter fire at Russia’s Norilsk smelter, Western Mining’s forecast that Russia’s output may drop to 160,000 tonnes this year, Inco’s 27,000-tonne cutback in early 1994 and its forecast of sharp declines in LME stock levels in the first quarter of 1994, and news that U.S. producer premiums are rising — all pushed November’s prices, to date, up slightly. London Metal Exchange (LME) figures stand at US$2.09 (US$2.02) per lb. (Comparable figures for the previous month are shown in parentheses.) LME inventories also moved up slightly, to 119,358 (119,196) tonnes.

Cobalt prices are steady, with Western brands at US$13 (US$12) per lb. and traders offering Russian products at US$12 (US$11).

Mine closures and increasing concentrate shortages supported LME lead prices, in a narrow range at US17.9 cents (US17.4 cents) per lb., as inventories advanced to 299,550 (293,450) tonnes.

LME zinc stocks increased again, reaching 838,475 (828,350) tonnes as prices also rose slightly to US42.4 cents (US41.5 cents) per lb.

Favorable U.S., but soft European demand kept LME copper prices at US73.3 cents (US74.7 cents) per lb. On a positive note, the combination of inventories on the LME and the Commodity Exchange of New York dropped to 692,228 (701,818) tonnes.

Better demand is firming prices for molybdenum oxide, at US$2.55 per lb., unchanged from last month.

Supported by headline news last week of frantic buying by funds and speculators, gold prices moved up to US$367.39 (US$364) per oz. Silver was quieter at US$4.31 (US$4.34) per oz.

The platinum group metals were all quiet. Auto catalyst and jewelry demand supported platinum at US$370.77 (US$368.32) per oz., but palladium, at US$129.40 (US$129.81) per oz., looks ready to consolidate after its long run up from mid-1992. Rhodium moved up slightly to US$1,100 (US$1,030) per oz. — The writer is a metals consultant offering services in metals trading, marketing research and project management.