Toronto—Commodity prices are on their way back up, according to Scotiabank’s latest Commodity Price Index. After falling back in July, the index rose 3.5 percent in August. So far, it’s climbed 6.7 percent above its cyclical low in April. Industrial metals are leading the rally.
"Base metal prices have already returned to profitable mid-cycle levels, a development normally taking several years following the end of a global downturn and a testimony to the resiliency and growing importance of China and emerging Asia…," said Patricia Mohr, vice-president of economics and commodity market specialist at Scotiabank.
China’s imports of copper, zinc and nickel were at record levels through the first half of 2009, despite the global recession. China is strategically stockpiling inventories, while meeting short-term industrial demand, Scotiabank reported.
China’s copper consumption climbed 25 percent i in the first half of 2009, excluding inventory-building by government and fabricators, and by an even bigger 48 per cent, if inventory accumulation is included.
Gold prices, which surged to a near-term high of US$1,024 per ounce in September, are also being monetized by renewed bouts of US dollar weakness and calls for development of a new reserve currency.
Metals and minerals
The metals and minerals index led the overall gain in in August—surging 8.1 per cent month over month, with widespread gains in base and precious metals and steel alloy prices (molybdenum and cobalt). The gains more than offset slight declines in potash, sulphur and uranium prices.
Copper prices on the London Metal Exchange have more than doubled from a low of US$1.26 per pound in December 2008, to a peak of US$2.94 in August 2009. Prices fell back to US$2.67 in late September, but copper will continue to outperform other base metals.
"Silver prices have recently outperformed gold—jumping over US$17 per ounce— benefitting from an expected pick-up in industrial, electronics demand as well as silver’s role as a precious metal," Mohr added.
Oil and gas
Oil prices jumped to US$71 in August, climbing as high as US$75 in trading on August 28. But prices are still volatile and have dropped to US$66 to 67 in recent days, on disappointment over US economic indictors, suggesting a bumpy recovery.
The market has focused on high US inventories of crude and refined products, rather than the year-over-year pick-up in US petroleum consumption, which got underway in August and has carried through into September.