The commodities market ended 2010 on a high note, which is good news for resource companies heading into 2011.
According to a Scotiabank commodity price index report released Thursday, price trends in 32 of Canada’s major exports jumped 5.5% in December compared with the month before – and the trend has continued into 2011 with China continuing to demand natural resources.
“While prices retreated on January 20 after news China’s GDP grew by a faster-than-expected 9.8% in 2010:Q4, up from 9.6% in Q3, suggesting the need to tighten monetary policy further to stem inflation, we continue to believe that China’s economy will expand at a healthy clip in 2011,” commented Patricia Mohr, Scotiabank’s vice-president economics.
For the metals and minerals sector, star performers were copper, uranium and coal.
Copper prices hit an all-time high of US$4.44 per pound on January 19, a 15% increase compared with the spot price in early December.
As well, uranium prices continued to climb hitting US$70 per pound this month on thin spot market availability, Scotiabank said.
Uranium prices have been on an upward trend for months now as governments around the world, including China, look to the commodity as a source for clean nuclear power (see “Uranium miners rushing everywhere but here” – issue 1108, January 18 to 24.)
Scotiabank expects contract prices for coking coal, of which B.C. is a major producer, could jump as high as US$300 per tonne in 2011's second quarter.
Mohr believes extreme flooding in Australia’s Queensland region, known for its massive exports of metallurgical coal, will continue to constrain the market and drive prices upward.
But the metals and minerals sector isn’t the only area showing strength.
Scotiabank’s forest products index climbed 0.8% in December as lumber prices increased to US$321 per thousand board feet.
Mohr said that price level is profitable for B.C. interior producers, with Chinese demand for B.C. products boosting the sector while U.S. housing starts continue to languish.