METALS MARKETS — Metals markets in unsettled state

World trade in metals continues to be disorderly. Potential mining properties are being placed on hold because of declining markets and onerous government approval regulations.

Returns on existing properties are dropping and cost-cutting is the main preoccupation of management. All cost areas are under examination, including sacrosanct taxes and state-owned or state-controlled utility suppliers. Recently arrived East Bloc competitors, heavily subsidized and often state-owned, have free access to Western markets and a lot of product. Some Western producers will be forced to close plants that can be viable only in free markets.

In spite of this, most metal consumption continues at reasonably good levels, albeit at low prices. The main problem now is that uneasy consumers hold little in the way of inventories, and lead times to obtain many manufactured products are creeping upward. As the world economies turn around in 1993, supply side shortages are likely to occur.

In cobalt, for example, the largest producer, Gecamines, is in Zaire where civil strife may soon cause serious supply disruption. Russian cobalt exports are the only reason prices are still somewhat stable; they rose to $35 per lb. in recent months before settling back to $14-18.

In the midst of this turbulence, the French and U.S. government agencies are selling metals from their strategic stockpiles, including cobalt. The timing for these sales may add some pricing stability but short-change the original purpose for which they were accumulated.

December cobalt dealer prices (with November values in parentheses) are holding around $15.50 ($16) for Western brands and $14 for Russian. Producers are listed at $18 ($25) with some discounts available for quality and quantity.

On news Russia would curtail further production and exports, LME cash nickel prices surged to $2.69 per lb. before settling back when the information was found to be a restatement of a previously announced cutback for smelter maintenance. (Shades of penny stock promoters.) Prices then stabilized at US$2.575 ($2.525) as inventories jumped again to 67,194 (62,676) tonnes. Molybdenum oxide eased to $1.80-1.90 per lb. ($2-2.10) on slow sales to steel companies.

In other metals, slow economic activity and recent selling of stocks by currency speculators are adding substantial tonnage to terminal markets. LME and Comex copper inventories reached 415,873 (391,265) tonnes. Average LME cash prices are so far little changed at US99.3 cents (97.9 cents) per lb. On disappointing battery sales, LME lead prices held at US20.7 cents (20.9 cents) per lb. as stocks rose again to 212,800 (199,900) tonnes. Zinc prices are surprisingly steady with LME prices at US48 cents (47.5 cents) per lb. and stocks up sharply to 450,125 (377,275) tonnes. Precious metals, particularly the platinum group, are more active with civil unrest in the main supplier countries, South Africa and Russia, blamed. Platinum jumped to US$363.59 ($355.71) per oz. and palladium was ahead at US$106.76 ($94.52) per oz. About to test the down-trend line again, gold moved up slightly to US$335.33 ($334.88) per oz. Silver softened to US$3.74 ($3.77) per oz.

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