Scotiabank’s commodity price index dropped 1.9% in June on rumours the Chinese economy is expected to cool.
The index measures price trends in 32 of Canada’s major exports such as metals and minerals, oil and gas, forest products and agriculture.
According to Scotiabank commodity market specialist Patricia Mohr, June’s decline was less than the 5.2% decline in May, but remained 21.4% above the April 2009 cyclical low.
Mohr said: “Prices retreated alongside the spectre of slowing growth in China – of critical importance to raw material demand – ongoing concern over the sovereign debt crisis in Europe … and little financial market confidence in the sustainability of the U.S. industrial recovery.”
After hitting a high-water mark for 2010 in April the metals and mineral index slipped 3.6% in June.
The outlook remains positive for Vancouver-based copper producers as China continues to encourage electric vehicle production and upgrade its power infrastructure. That, said Mohr, will underpin a need for copper.
“There’s still a lot of strong demand coming out of China … and just this morning we had news that traders in Shanghai are buying copper.”
China’s copper demand will grow 8% in 2011 compared with 10% this year.
Despite weak European demand due to the sovereign debt crisis and increased mine development, Scotiabank believes copper prices should average US$3 per pound in 2011.