METALS MARKETS — Seasonal shutdowns may be extended

In an attempt to bring inventories in line with demand, much of the Western World’s heavy industry is planning extra-long shutdowns during the normally slow Christmas and New Year’s period.

Along with their customers, metal producers are also closing or planning to operate at sharply reduced levels. Several nickel producers announced they intend to remain closed throughout January and there is now some question whether some of these will reopen, at least until market conditions improve. Metals such as copper and cobalt and the platinum group, co-produced with nickel, will also experience proportionate drops in output.

The problems of the republics of the Commonwealth of Independent States (CIS) continue to be felt far beyond their borders. The shift to market economies mixed with rapidly depreciating local currencies has cut domestic demand and accelerated exports to earn hard Western currencies. Except for food, imports of Western raw materials such as molybdenum are non-existent. Internally, trade among the various CIS republics is increasingly disrupted. An indication that the system there may be faltering is the recent cessation of operations at the large 800,000-tonne aluminum smelter in Tajikistan because of a lack of raw materials and spare parts, civil disturbances and payment difficulties. Also, the U.S. and Canadian governments recently suspended food shipments for non-payment of debts.

The present system (or lack of it) does not yet seem to be channeling enough funds into CIS treasuries to enable officials to operate basic institutions such as police and customs, or a respected ruble currency.

Except for the slow building of inventories, early December prices for most metals are to date little changed from November.

In November, surging nickel inventories and slumping prices caused concern to Western markets and miners. The producer and LME inventory growth is an excellent reflection of the amount of unofficial CIS nickel exports to mostly West European mills. German steel plants are the main short-term beneficiaries. Steel trade wars, unemployment and eventually increased consumption may result.

November LME cash nickel prices (with October numbers in brackets) fell to US$2.525 ($2.861) per lb. as inventories jumped again to 62,676 (55,080) tonnes.

Western-brand cobalt dealer prices are holding at around $15-16 per lb. African producers dropped their official price basis to $18, with some discounting of less pure forms. There are rumors that the African producers reached an unofficial agreement with Russia to stabilize cathode prices. The result will probably be similar to the nickel chaos.

Molybdenum oxide eased to US$2-2.10 per lb. on softer seasonal sales to steel companies.

Continuing the rise of the last several months, LME and Comex copper inventories reached 391,265 (387,750) tonnes. Average LME cash prices eased to US97.9 cents ($1.022) per lb. Merchants are reported to have tolled much of the smelter backlog of copper concentrates in the CIS plants and this is now adding to LME inventories.

In slight surplus, zinc markets slipped and then steadied with LME prices down to US47.5 cents (52.8 cents) per lb. and stocks unchanged at 377,275 (377,575) tonnes.

LME lead prices slid to US20.9 cents (24.4 cents) per lb. as stocks rose again to 199,900 (181,475) tonnes.

Precious metals prices are steady amid growing world civil and currency unrest. Platinum eased to US$355.71 ($358.13) per oz. Still showing strong chart strength, palladium was unchanged at US$94.52 ($94.75) per oz. After testing the down trendline, gold backed away again but it remains volatile at US$335.71 ($344.29) per oz. Silver improved slightly in quiet trading to US$3.77 ($3.75) per oz.

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