METALS COMMENTARY — Metals markets show strength as summer season draws to close

Manufacturers of base metals and stainless steel remain busy, and scrap prices are again stronger, as the summer holiday season draws to a close.

Markets are characterized by ongoing realignments, rationalizations, shortages and near-capacity utilization.

These conditions indicate that another surge in industrial capacity expansion is well under way in many sectors, a sign of which is that countries are competing ferociously for the industry and employment associated with the new plants.

Spot shortages are persisting, with some traditional ferro-alloy suppliers switching between products, depending on net returns.

Some grades of scrap remain in tight supply, while disruption is evident in markets for many other types of low-grade scrap, which used to move easily to recycling plants.

The Basle Treaty, as originally conceived by governments, was designed to stem the transfer and disposal of hazardous and toxic wastes to Third World countries, which were deemed too poor or inexperienced to say no to such money-making opportunities. So that abuses might be prevented, all treaty waste trading became subject to a written approval process involving governments and commercial banks. Contrary to the good intentions of countries such as Canada, which helped orchestrate the treaty, some countries are using the agreement to tamper with normal commercial trade. Many instances of delays have been reported, even among countries in the European Community, where the items involved have been traded to smelters and refineries for decades. It appears the delays are often related to the scrap needs of consumers within the shipping country.

The following prices and inventories of the London Metal Exchange (LME) are for August to date, with the previous month’s corresponding figures shown in parentheses (unless stated otherwise).

Strong demand and shortages pushed nickel to US$4.05 (US$3.90) per lb., as inventories fell to 70,134 tonnes (compared with 74,982 tonnes at the end of July).

Ignoring U.S. stockpile recommendations, renewed demand moved cobalt free-market quotes for Western Grade A to US$28 per lb. (US$27 on July 30).

News of Cominco’s involvement in labor negotiations had no apparent impact on lead prices, which rose slightly to US28.3 cents (US27 cents) per lb. Stocks fell again, to 230,225 (234,425) tonnes.

Solid seasonal demand maintained zinc at US46.2 cents (US46.6 cents) per lb., wheras the price of the red metal was comparatively fickle.

Ignoring the rise in the combination of inventories on the LME and Commodity Exchange of New York, which rose to 179,496 (168,524) tonnes, copper fluctuated and then began moving upwards, reaching US$1.38 (US$1.39) per lb.

On steady sales and little additional news, spot molybdenum oxide prices hovered around US$6 per lb. ($7 at the end of June).

As for precious metals, they continued to trade erraticallY at current levels. Gold ebbed slightly to US$383.85 (US$385.87) per oz., as did silver, which

averaged US$5.30 (US$5.17) per oz.

For its part, platinum slipped to US$422.31 (US$433.45) per oz., while palladium followed suit, falling to US$150.21 (US$155.30) per oz. And in a stunningly poor performance, rhodium sank below platinum tags, hitting US$415 (US$500) per oz.

— Jack Dupuis is a metals trader, broker and consultant.