METALS COMMENTARY — Proposed changes may affect industry

Several widely used industrial metals and substances were recently declared toxic under the Canadian Environmental Protection Act (CEPA), and virtually every mining, manufacturing and service sector that uses these materials will be affected.

Chief among those sectors are auto-manufacturing, aerospace, aircraft and metal-finishing.

Singled out as toxic were: hexavalent chromium; the many oxides, chlorides, sulphates and other salts of nickel; and cadmium metal, together with all its related compounds. A late addition is lead, already notorious for being heavily regulated.

Environment & Health Canada will now enter formal discussions with producers, manufacturers and other users of these substances to determine what additional regulations, if any, are required to protect the environment. Possible options include bans, phase-outs, quotas, usage surtaxes and mandated recycling.

Traditionally, this area is managed by provincial regulators, who have already instituted an enormous regulatory regime to control and ensure safe use of these materials. However, attempts are being made to expand regulatory control at the federal level, with officials of Environment & Health Canada reportedly circulating a draft revision to the CEPA, calling for 141 changes.

Turning to the overall picture for metals markets, current indications are that demand will remain firm in the fourth quarter.

Smelters and mills are running at normal rates, and producer premiums for many exchange-traded metals are up slightly. Healthy demand for scrap has resumed as well.

A list of metals, including alloys, master alloys and ferro-alloys, has increased substantially over last year’s tags. The recent selloff, attributed to fund liquidations, has left many of these largely untouched (or, in some cases, stronger again). Contributing to this trend are the sharp rises in consumption within the former centrally planned economies.

The following average prices and inventories of the London Metal Exchange are for the month of September, with the previous month’s figures shown in parentheses, unless stated otherwise.

It would seem that a slow rise in price is under way for most base metals.

Strong sales of stainless steel kept nickel at US$3.81 (US$4.06) per lb., as inventories fell to 61,500 tonnes (66,666 tonnes at the end of August).

Renewed consumer buying edged cobalt free-market quotes for Western A Grade to US$28.75 per lb. (US$28.50 on Aug. 31).

Lower mine production and higher production from recycled batteries continued to support lead at US26.8 cents (US28.3 cents) per lb., as stocks fell again, to 214,200 (225,300) tonnes.

Quiet but steady seasonal demand held zinc at US44.5 cents (US46 cents) per lb., as stocks slipped to 748,500 (764,325) tonnes.

Meanwhile, the combination of copper inventories on the LME and Commodity Exchange of New York rose to 189,805 (176,937) tonnes in August, as the average price for that month weakened to US$1.31 per lb. (US$1.38 in July).

Spot molybdenum oxide prices, which fell to $4 ($4.50), appear to be on the rebound, as producers demonstrate resistance to further price erosion. (Ferro-moly, which is made from oxide, has been slowly recovering to the $7 range.)

Precious metals, on the other hand, are showing precious little sign of life.

Gold ebbed quietly to US$382.93 (US$383.51) per oz, while silver averaged US$5.42 ($5.38) per oz.

And while forecasts of higher auto catalyst sales, particularly in Europe, elevated the price

of platinum to US$431.75 (US$424.58) per oz., palladium and rhodium both faltered, to US$144.80 (US$149.57) and US$350 (US$500) per oz., respectively.

— Jack Dupuis is a broker and consultant specializing in the marketing of metals.