Scotiabank economist Patricia Mohr Thursday noted that big jumps in potash and sulphur prices just offset widespread declines in base and precious metals and lower uranium prices last month.
Sulphur prices leapt to US$660 per tonne in May-- up 1,100% year on year and the biggest single spike of any commodity in the history of the Scotiabank Commodity Price Index (in data back to 1972). Mohr said the spike in sulphur prices has surpassed the Hunt Brothers' silver squeeze in early 1980.
In her analysis, Mohr said potash prices at the Port of Vancouver jumped from US$504 per tonne to $525 per tonne in April and will likely climb to an average of more than US$800 by late 2008.
Mohr also asserted that $1,000 per tonne potash prices are affordable for most farmers, given lucrative crop prices. As an example, when U.S. corn prices are US$7 per bushel (touching over US$8 in mid-June), potash prices at US$1,000 would only account for 3.6% of revenue (assuming normal crop yields of 140 bushels per acre and 35 kg of potash applied per acre.
In contrast to soaring fertilizer prices, Mohr noted that base metals have lost ground in the past two months alongside unease over prospects for slower global growth and anticipation of new mine development (especially in zinc). Spot uranium prices have fallen back to only US$57 per pound (likely oversold and near a bottom), while term-contract prices remain steady at US$90.
Although LME copper prices have eased from a record high of US$4.03 per pound on April 10th and are currently USD$3.76, Mohr asserted that copper prices remain resilient and are very lucrative for miners. ...With traders hesitant to ‘short' copper given low ‘visible' exchange stocks and intermittent supply disruptions, copper prices are still expected to average US$3.50 per pound in 2008-up from US$3.23 last year-and remain over US$2 over the balance of the decade (much higher than in the 1990s).
Mohr also noted that LME aluminum prices are also performing well. Aluminum prices should average about US$1.35 per pound in 2008 and 2009-up from US$1.20 in 2007. She also stated that China is expected to return to net importer status in 2009, adding that tight electricity supplies in China and South Africa (likely lasting for several years) are also raising [aluminum] smelter costs.
Scotiabank's Commodity Price Index climbed 3.9% month-over-month last month, which Mohr said was the fifth consecutive record in as many months in 2008.