Metals sub-index declines

The metal and mineral sub-index of Scotiabank’s commodity price index declined slightly in February after two months of modest gains.

The decline was largely due to stagnant base metal prices. Economist Patricia Mohr says demand has been hit hard by a sharp drop in industrial activity in Germany and Japan. This has more than offset a pickup in the U.S. A turnaround in Germany and Japan is not expected until well into 1994, Mohr adds.

On a brighter note, copper prices in late March were still at a profitable US97 cents per lb. Although Western consumption fell by about 1% last year, market conditions have been underpinned by a large increase in Chinese copper imports and tighter global concentrate supplies, Mohr explains. Refined copper imports from China increased from only 35,000 tonnes in 1990 to about 260,000 in 1992. They should rise to well over 300,000 tonnes in 1993-94.

Chinese reforms have opened the gates to a flood of foreign and private sector investment. This has also led to an increase in imports of construction materials (galvanized and stainless steels as well as copper) to build plants.

Mohr notes that, unlike other base metals, London Metal Exchange inventories of copper are not at record highs (354,700 tonnes compared with the previous peak of 643,325 tonnes in 1978). However, exports from the Commonwealth of Independent States to the West may have been under-reported last year. Russian military demand fell sharply which probably increased export supplies. The metal and mineral sub-index was down 0.9% in February from January and off by 7.7% from one year ago. The all-items index surged by 7.3% in February to a level 11.1% above that of a year ago.

The all-commodity index tracks export prices of a variety of Canadian commodities. These are are weighted according to their 1984 export values, except crude oil, for which the value of net exports is used.