METALS MARKETS — Russian nickel sales spur market

Fast-moving news continues to sway nickel markets. Russian exports of official and unofficial nickel are the dominant influence.

Unofficial Russian nickel metal and scrap, selling at substantial discounts to the LME, in competition with normal stainless scrap, is displacing other nickel forms. Large amounts of official Russian metal exports are now finding their way into LME warehouses.

Western producers, while reducing their own production levels only slightly, are purchasing increased quantities of Russian matte for their refineries. Stainless production, which accounts for 60% of nickel consumption, is improving slowly in Europe and North America but has not quite yet bottomed in Japan. Because of the length of the downturn, stainless scrap availability is tight and prices firm around US$800 per long ton. Nickel content in this scrap is valued at around US$2.95-3.00 per lb.

Because of reduced military and commercial aviation demand, nickel consumption, in the aerospace industry, in both the West and in Russia, is declining. Some 40% of the nickel normally consumed by this sector is temporarily available for other markets.

The expected economic improvement and the tightness in scrap has attracted a host of commodity investors anticipating a strong turnaround in metal demand and prices, adding to market volatility.

Because of strong demand and a rumored smelter problem, steady Chinese buying has absorbed some of the recent Russian shipments.

However, a seasonally slow third quarter, in which nickel production and demand in most markets drops, will leave only the LME to absorb any excess material. In the past few days, LME nickel stocks surged to a record 40,968 tonnes from 34,560 tonnes on July 31 and 28,296 tonnes the prior week. In reaction, the average price to date in August fell to US$3.289 per lb., down from the July average of US$3.402.

Despite renewed unrest in Zaire, low cobalt demand eased prices to US$19 per lb. from US$20.50 on Aug. 1. Russian cobalt exports added to the pressure, selling at discounts of up to US$5 per lb.

Good demand and low scrap availability kept copper producers operating at capacity. LME and Comex stocks were up slightly to 285,259 tonnes from 283,657 tonnes on Aug. 1. The average LME price to date in August is US$1.136 per lb., down from US$1.144 in July.

In spite of another rise in LME stocks to 345,125 tonnes from 338,725 tonnes, zinc sales remain strong; the LME cash average rose slightly to US61.2 cents per lb. from US59.9 cents in July.

LME cash lead, rumored to be the object of a pending squeeze, rose again to an average to date in August of US29.9 cents lb. from US28.9 cents in July. Stocks were also up to 150,625 tonnes from 147,200 tonnes on Aug. 1. Supported by improved steel industry business, molybde-

num prices remain firmly in the range of US$2.40-2.50 per lb. for oxide. — Jack Dupuis is a minerals marketing consultant based in Thornhill, Ont.