METALS MARKETS — Norilsk sends ripples through markets

Metal markets entered December on the strength of solid demand and rising prices. As the holiday season winds up, most metals are expected to settle back and consolidate recent gains while stakeholders recognize profits and assess directions for the new year, when consumers return to work.

Rising interest rates should temper demand in the U.S. sometime in 1995. Physical tightness and falling stocks in most metals are boosting prices. Inflation, while still low among member nations of the Organization for Ecomomic Co-operation and Development, remains a threat, especially considering that recent surges in metal prices have yet to work their way through to the consumer.

Financial markets are tense and increasingly wary, and investors seem poised to respond to any changes in government policy that seem likely to depreciate their income or assets.

At presstime, metal markets were dominated by rumors of a power plant failure in Norilsk, situated in north-central Siberia. Concern was centering around what effect such a failure will have on exports.

Whole sections of Norilsk are reported to be without electricity. If these reports are true (and there have been official denials), Russia would suffer a drop in production and this, in turn, would have an impact on already-tight metal markets in the West. In particular, nickel, copper and the platinum group metals could be affected.

According to one industry source, Russian nickel exports could fall by 20,000 tonnes in the first quarter of 1995.

Base metals, in general, experienced some profit-taking in recent weeks, which weakened prices in spite of falling stocks. The following prices and inventories of the London Metal Exchange (LME) pertain to the first half of December, with the previous month’s figures shown in parentheses. Strong demand for nickel units and lack of information from Russia (which supplies some 15% of Western market needs) pushed the price to US$3.94 (US$3.43) per lb. as inventories declined to 149,688 (150,732) tonnes. In Europe, spot nickel reached US$4.18 before settling back to US$3.90-4. Confirming a lack of supply, the well-watched U.S. Mint tender was under-subscribed.

The rising tightness in cobalt edged the free-market price ahead to US$27.50 (US$26) per lb.

Seasonal destocking and profit-taking had the effect of softening lead to US28.7 cents (US30.3 cents) per lb. as stocks fell to 356,925 (357,775) tonnes.

Also weakening slightly was zinc, which, despite good physical demand and falling inventories, fell to US50.9 cents (US52.3 cents) per lb. as stocks remained little changed at 1.2 million tonnes.

Copper, meanwhile, was spurred to US$1.34 (US$1.27) per lb., as a result of heavy demand and rumors of production problems in Russia. Another influence on price was a drop in the combined inventories of the LME and the Commodity Exchange (Comex) of New York. These fell to 325,329 (337,334) tonnes, and spot prices now exceed US$1.37.

Good steel demand is keeping molybdenum oxide spot price quotes in the range of US$7-8 (US$7) per lb.

As a group, precious metals were all softer. In quiet markets, gold dropped to US$377.55 (US$384.38) per oz. and silver settled to US$4.75 (US$5.19) per oz. The platinum group metals traded down, with platinum

at US$403.33 (US$412.56) per oz., palladium at US$152.94 (US$156.51) per oz. and rhodium at US$655 (US$680) per oz.

— Jack Dupuis is a metals agent, broker and consultant specializing in the marketing of mining properties.