METALS MARKETS — LME sets pace for world metal prices

London Metal Exchange (LME) prices and stocks continue to preoccupy investors, investment funds, speculators, scrap merchants, producers and consumers, all legitimate buyers and sellers of metal contracts.

During the last few years, the pricing basis for most producer metal contracts shifted from the producer’s list prices and inventory reserves to the basis of one of the exchange quotations and the inventory held there. As a result, world metal prices now fluctuate based on the movements of the relatively small exchange stocks.

Concerted efforts by any one of the above groups to manipulate these stocks to their advantage can rapidly affect price levels there, and on other exchanges.

Zinc LME cash and 3-month prices appear to have topped for the time being and look set to consolidate some of their recent gains. In mid-June, LME officials moved to investigate the squeeze on nearby contracts as prices and inventories have surged upwards in recent months. The average LME cash price for June was US62.9 cents per lb., up slightly from US62.3 cents in May. LME stocks rose again to 330,650 tonnes from 265,000 tonnes on June 1. Nickel was quiet in June as markets awaited further developments. Russian shipments continue apace. Stainless scrap prices remain firm, around US$790 per long ton. High-cost producers are, at best, in a break-even position. Falconbridge settled a short strike at Sudbury, Ont. The question as to whether consumer demand can pick up fast enough to avoid more producer cutbacks will be deferred now until after the 4- and 5-week vacation shutdowns are completed. Most major customer plants also take similar summer breaks.

The LME cash price for June was US$3.263 per lb., down from the US$3.324 per lb. in May. Stocks hovered around 30,000 tonnes, until month-end when they suddenly dropped to close at 28,296 tonnes. In reaction, the spot price jumped 15 cents.

Copper markets were up again in June, reflecting excellent demand and falling inventories. The threat of a U.S. rail strike also prompted some advanced buying as consumers have virtually no inventories. Except for the drop in production at the African producers because of drought and social unrest, smelters elsewhere are operating at maximum capacity.

The question as to whether new mine capacity using solvent

extraction-electrowinning methods (which make cathode without the need for smelting) can fill the void awaits an answer. Meantime, several copper companies are exploring new or expanded smelter options.

LME and Comex (Commodity Exchange of New York) stocks declined 7,000 tonnes in June to 289,071 tonnes. LME average cash prices moved up to US$1.042 per lb. from US$1.006 in May.

Lead LME average cash prices for June were US24.8 cents per lb., up from US23.6 cents in May. Stocks moved up to 143,025 tonnes from 137,000 tonnes at the end of May.

Cobalt dealer prices in June eased to the US$23-25 per lb. range as buyers largely remain out of the market.

Molybdenum prices are steady in the range of US$2.30-2.40 per lb. on good steel industry demand.

In precious metals, platinum rose in June on increased buying led by renewed investor interest. Average June prices were US$369.25 per oz., up US$11 from May. Palladium average prices in June eased to US$80.69 per oz. from US$82.79 in May.

Gold markets are mixed. Repeated news of consumption, led by high jewelry sales, exceeding annual production conflicted with increased central bank and other selling. June average prices were US$340.74

per oz., up slightly from US$337.04 in May.

— Jack Dupuis is a minerals marketing consultant based in Thornhill, Ont.