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Tuesday, Oct 03, 2006

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Agri-Biz & Commodities - Metals
Overall, metals perform well in Q3

G. Chandrashekhar

Mumbai , Oct. 2

Despite growth fears and market fluctuations in the just-ended third quarter (July-September) of this calendar year, prices remained strong in the case of most base metals.

Fear of supply disruption through strikes and the like contributed to price action.

Clearly, the quarter was characterised by growing concerns over the widely touted ending of commodities bull market; yet, the actual performance of commodity prices remained exceptionally strong on the whole. Indeed, most of the commodities registered Q-on-Q price gains.

Nickel gains

In the base metals category, the strongest performer by a large margin was nickel with a remarkable 54 per cent gain on the quarter.

Nickel, that was 672 cents a pound in Q1, rose to 903 c/lb in Q2 and further on to 1391 c/lb in Q3.

Weakest performer

Aluminium was the weakest performer with a 6.5 per cent decline, as price fell to 113 cents/lb in Q3 from 120 c/lb in the previous quarter.

Indeed, aluminium price fall was negligible when compared with the price fall for the raw material used to make aluminium, that is alumina which registered a 43.7 per cent fall on the quarter ($ 314 a tonne in Q3 from $ 557/t in Q2. In Q1, alumina was $625/t.).

Interestingly, following a peaking of prices in May, on an average, the index of base metals prices has remained remarkably stable at high levels, an expert observed adding, "Growth slowdown fears were perfectly offset by supply disruption fears".

Index of LME metal prices has remained strong in recent months.

Steel firm

Among industrial metals, hot-rolled steel prices remained strong, albeit weakening slightly during the quarter, while stainless steel prices continued to soar reflecting higher nickel costs and tightness of supplies.

On the other hand, precious metals had a slightly disappointing quarter, except for platinum, although they remain strong up Q-on-Q.

For instance, gold averaged $601 an ounce in Q3, down 2.2 per cent on $614/oz in the previous quarter.

Receding geopolitical concerns, relatively stronger US dollar and slowdown in physical sales combined to press the market down. Silver fell 5.8 per cent to $11.3/oz ($ 12.0/oz).

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