Russian sales upset nickel market

Nickel — A rise in Russian exports is having a disquieting effect on global markets. Nickel prices have been consolidating for almost two years, and producer mine closures and other cutbacks in production levels in 1991 should have begun to bite by now. However, as western producers slowed output, Russian exports increased as the upset in the former Soviet Union disrupted domestic consumption. While recently higher, LME stocks at 25,000 tonnes are about two weeks’ consumption and these are the only freely available stocks in the world.

Factors clouding the outlook include the future level of Russian exports and demand for stainless steel which consumes 60% of nickel production. North American stainless mills began recently to increase production. Stainless 18/8 scrap availability remains tight, with prices around US$835 per long ton. The nickel price equivalent in this material is US$3.29 per lb. On the LME, February spot prices moved up, peaking at US$3.73, and have since fallen back to the US$3.33 range. Rumors attribute the price activity to investment fund managers covering shorts and assuming long positions in anticipation of supply tightness in coming months. Place your bets. Zinc

A recent spring pickup in economic activity and resulting orders have lifted prices to the US55 cents-per-lb. range. LME stocks, while up to 215,000 tonnes from 167,000 tonnes last month, are only about two weeks’ consumption. Overall supply and demand are reasonably balanced. Prices should react upward on continued news of economic improvements and any further supply disruptions such as rumored shutdowns. Zinc is mainly a consumer product and construction industry metal.

Copper

Prices have been in decline along with the slowdown in demand for wire and tubing products. The February LME average Grade A price of US$1 per lb. is up slightly from January. Drops in output levels at several mines in Zaire and Zambia, and the closure of some U.S. refining capacity, has allowed new production to easily find a home. Current LME stocks of 329,000 tonnes are about two weeks’ consumption. Average prices around US$1 look sustainable for the near term. Below this level, increased cutbacks and shutdowns would begin to occur.

Lead

LME primary lead prices have settled around US24 cents per lb. Closures and cutbacks continue at these low levels, which are near the costs to recycle the metal. Largely a coproduct of zinc, lead has been under environmental and legislative pressure. Its traditional uses in gasoline and paints are being reduced. The brightest outlook continues to be in batteries, although a relatively warm winter has recently slowed this industry. Production and de- mand are roughly balanced. Although up recently, LME stocks at 135,000 tonnes are about two weeks’ consumption.

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