A mild growth slowdown in China has generated “jitters” in the commodities market this spring, putting downward pressure on metal prices that could affect revenue for B.C. miners.
Patricia Mohr, vice-president economics and commodity market specialist at Scotiabank, believes the metals and minerals market is likely to level off somewhat throughout the summer.
“I don’t think there’s going to be a hard landing, I just think it’s a mild growth slowdown which appears to be under way in China,” Mohr said. “The summer is a period of doldrums for industrial activity … so I think commodity prices in general are going to consolidate in the next few months.”
Scotiabank’s monthly commodity price index, which tracks price trends in 32 major Canadian exports, was up 6.1% in April compared with the month before.
But that strong growth trend was curbed somewhat in the last half of April as concerns over high food and energy prices “percolated” through commodity markets, said Mohr.
Then, in early May, the Chicago Mercantile Exchange took notice of skyrocketing silver prices and raised purchasing margins 84%, triggering a sell-off that hit silver as well as other metals, Mohr said.
Between April 29 and May 12, silver prices dropped 28% to $34.79 per ounce.
“Because silver came down so much I think it kind of unnerved commodity markets.”
Although commodity prices are expected to pull back somewhat during the summer, Mohr believes steel-making coal markets will be underpinned by China’s increasing reliance on seaborne imports to satisfy demand.
That’s good news for B.C.’s coal producers, and she said demand for copper could increase as China’s fabricators step back into the market due to low inventory levels.
Joel McKay
Twitter: @jmckaybiv