Scotiabank Commodity Index dips

Scotiabank’s Commodity Price Index fell in September, declining 2.8% month over month (m/m) and 3.8% year over year (yr/yr).

While the All Items Index will likely fall further over the balance of 2013, the correction in commodity prices, especially in metals and minerals, since April 2011 should be largely over by year-end.

Read: Energy portfolios must factor in pricing

“Traditionally, junior mining companies have been important contributors to mineral exploration across Canada, finding and delineating deposits, before selling them to senior producers for development,” said Patricia Mohr, Scotiabank’s vice president of economics and commodity market specialist. “However, equity capital raised by junior mining companies on the TSX Venture plunged in 2012 and has moved even lower in 2013 year to date.

A revival of equity capital for junior miners will depend largely upon a cyclical rebound in metal and mineral prices and an improvement in investor sentiment for senior producers. But M&A activity, financed by private equity, is beginning to pick up.”

Read: Slow times for oilpatch deals

Highlights of the report include:

• The hard-pressed beef and pork industry in Western Canada received some good news from the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union (if ratified).
• Spot uranium prices have dropped from US$66.50 per pound—just prior to the March 2011 Fukushima-Daiichi nuclear plant accident to US$34.75 today—instead of soaring as would have been the case, given the need for low-cost, base-load electricity demand in rapidly growing emerging markets. A recovery in uranium prices awaits the restart of reactors in Japan- likely to begin in 2014.
• While potash prices will probably drift down over the balance of the year, the global cost curve indicates that most of the decline has already occurred, and prices are near bottom (at least on a sustainable basis).

Read: Energy firms can’t rely on price spikes, says EY

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.