Metals and minerals sub-index jumps again in January, says

The metals and minerals sub-index of The Bank of Nova Scotia’s commodity price index rose again in January alongside firmer prices for base metals, gold and potash.

Aluminum prices strengthened dramatically to US59 cents in late February from only US47 cents per lb. in November. According to economist Patricia Mohr, current prices are well above average cash costs of about US42 cents at Canadian smelters and are probably yielding profits at some operations. The major aluminum-producing countries, including Canada, have reached a preliminary agreement whereby the former Soviet Union will reduce output by 500,000 tonnes by mid-year, provided sufficient cuts are forthcoming from the West. So far, Western countries have announced reductions of 821,000 tonnes and these cuts total 7%

of 1993 world production, Mohr says.

However, Russia may have difficulty controlling output, since toll smelter treatment of Western alumina (the natural or synthetic oxide of aluminum) yields desperately needed foreign exchange.

Demand for aluminum was robust in the U.S. auto sector in 1993, but weak aerospace activity and inventory depletion by manufacturers served to limit overall U.S. gains to 0.9%. Although Western consumption is expected to expand by 2.5% in 1994, Japanese demand is not expected to recover significantly until 1995.

The metals and minerals sub-index was up 3.8% in January from December and off by 2.8% from a year ago. The all-items index fell by 1.9% in January to a level 6.4% above that of a year ago.

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).