- The upswing in global mine production during the second half
of the year was not mirrored fully in refined copper output in
2004, since smelters had to replenish their stocks of concentrate,
which had fallen to low levels. As a result of the small increase
in output, coupled with the significant rise in consumption largely
attributable to the United States and Asian countries, the deficit
of refined copper on the international marketplace worsened in
2004. Stocks declined sharply and the inventories held on metal
exchanges contracted throughout the year, tumbling to a year-end
level nearly 85% below that for 2003 and the lowest level posted
since the late 1980s.
- Supported by robust market fundamentals, the price of copper
soared in 2004, with prices also being buoyed by investment fund
interest in base metals. The average annual cash price on the
London Metal Exchange (LME) shot up by about 60% compared to 2003,
rising to US$1.30/lb, the highest level since 1995. The price
of copper ended the year on a high note, at US$1.49/lb. Given
the major deficit in the global marketplace and the low copper
inventories, the price of this metal was very volatile during
the year, reacting to news about the Chinese economy, potential
production shutdowns and the performance of the US dollar.
- The concentrate supply constraints affecting smelters gradually
eased up in 2004. After a difficult start to the year, treatment
and refining charges rose substantially during the second part
of the year. Furthermore, information available at year-end 2004
appears to show that the charges set out in annual contracts will
double in 2005.
Situation in Québec
- The Horne smelter’s 2004 output was slightly higher than
the level forecast at the start of the year (145,000 tonnes).
The appreciable increase in revenues derived from processing fees
may provide the impetus for stepped-up production at the Horne
smelter in 2005.
- The Louvicourt mine, the main copper producing mine in Québec
in 2004, will cease operating in summer 2005.
- In November, Campbell Resources became the sole shareholder
of Corporation Copper Rand (CCR). It expects to begin commercial
production at the Copper Rand 5000 copper and gold mine in the
first quarter of 2005. The mine has been in a pre-production phase
since November 2004.
- Campbell Resources continued exploration work at its Corner
Bay copper deposit near Chibougamau, and a ramp is to be driven
Outlook for 2005
- Although consumption of refined copper should stay firm in
China, Western countries will cut back on their consumption, particularly
the United States, leading to a drop in the global rate of expansion.
The increase in mine production will have more of an impact on
the supply of refined copper in 2005, since smelters have already
moved to replenish their stocks of concentrate. As a result, the
refined copper market should stabilize gradually during the year,
bringing about a significant reduction in the deficit situation
for the year as a whole. Copper prices will continue to benefit
from fairly tight market conditions, in a context characterized
by record low inventories on metal exchanges. Analysts believe
that the average annual price of copper will remain high in 2005,
but most of them foresee a slight decrease from the 2004 level.
- In 2004, world consumption of primary nickel continued to be
buoyed by the growth in stainless steel production, which accounts
for nearly two-thirds of consumption, as well as by an upturn
in other nickel uses. The rise in consumption was not as strong
as forecast at the start of the year, because of the high nickel
prices, which also affected supply. The high price resulted in:
- Greater availability of recycled stainless steel;
- Selling of stockpiles of nickel and stainless steel, particularly
- A substitution effect from the stepped-up production of
classes of stainless steel that contain less nickel.
||The international market for primary nickel continued to be
characterized by tight conditions in 2004, although predictions
about shortfalls were generally revised downward over the course
of the year.
- With the tight market situation and low stocks on the LME,
nickel prices remained true to their reputation of being highly
volatile, in 2004. The price fluctuated between US$8.06/lb, posted
on January 6, and US$4.78/lb, posted on May 18, ending the year
at US$6.90/lb, compared to US$7.55/lb at year-end 2003. Although
the price peaked early in the year, a number of analysts said
that it was higher than warranted by the market fundamentals at
that time, owing to speculative buying. Nickel prices fell sharply
in the first few months of the year, before edging up again and
sustaining their high overall level for the year. The average
annual cash price for nickel on the London Metal Exchange (LME)
rose from US$4.37/lb to US$6.27/lb, an increase of more than 40%
and the highest level since 1988. Nickel prices were also buoyed
by investment fund interest in base metals, which was stimulated
by the weak US dollar.
Situation in Québec
- The Raglan mine, on the Ungava Peninsula, is the only nickel
producer in Québec. In 2004, its output totalled 26,552
tonnes of nickel, up 5.7% over 2003. Research is continuing with
the aim of boosting production by almost 40% within the next few
Outlook for 2005
- Global consumption of primary nickel should expand at a faster
rate in 2005, particularly since China appears to have stopped
selling off stockpiles. International stainless steel production
is expected to continue its upward trend. Inco will begin production
at its Voisey’s Bay nickel deposit in Labrador. Nickel consumption
will likely be constrained again this year by tight supply conditions.
The world market should therefore be close to equilibrium or show
a small shortfall.
- The nickel market will continue to be buoyed by its relatively
solid fundamentals. With low stocks on the LME, the average annual
nickel price is likely to be high in 2005, although most analysts
are predicting a slight drop from the 2004 level. Factors such
as the recycled stainless steel supply and substitutions could
always come into play and change the picture, as they did last
- In 2005, the Raglan mine expects to produce 20,700 tonnes of
nickel, or 25% less than a year earlier, owing to a planned shutdown
at the processing plant in order to make changes to the grinding
circuit. In 2006, annual nickel production should decrease to
- Global production from zinc mines grew only slightly in 2004,
and the Western world’s output actually declined, slowing
the production of refined zinc. The Western market also had to
cope with a sharp drop in China’s exports of refined zinc,
as this country may have become a net importer. Consumption grew
at a high rate, once again bolstered by Chinese demand, but also
by the significant upturn in Western demand, particularly in the
United States. For the first time since 1999, the global refined
zinc market moved into a deficit position. Stocks on the LME nonetheless
remained high owing to the influx of unreported stocks over the
course of the year.
- The average annual cash price of zinc on the London Metal Exchange
(LME) rose a little more than 25% from the 2003 level, to US 47.5¢/lb,
the highest level since 2000. The price of zinc nonetheless increased
at a slower rate than several other base metals, on account of
the high zinc inventories. The price rose substantially at year-end,
however, as a result of the improved market fundamentals, including
a steady decline in stocks listed on the LME during the last quarter.
The price ended the year at US 57.6¢/lb, its high point of
the year. Zinc prices also benefited from investment fund interest
in base metals.
- The concentrate supply problem that smelters faced persisted
in 2004, and for the third consecutive year there was a drop in
treatment charges set out in annual contracts. The year-end forecasts
also point to a further decrease in these charges in 2005. Smelters
were nonetheless able to take advantage of the high zinc prices
in 2004, thanks to price participation escalator. This should
also happen in 2005 since a new price increase is foreseen.
Situation in Québec
- Zinc shipments from mines rose nearly 2% in 2004 from about
253,000 tonnes to 257,000 tonnes. This small upturn is due mainly
to the higher zinc output at the LaRonde mine.
- The CEZinc refinery in Salaberry-de-Valleyfield operated at
full capacity in 2004, producing nearly 275,000 tonnes of zinc
metal. The outlook for 2005 is equally promising, given the higher
prices and the low supply situation forecast for the zinc market.
- The Bell-Allard mine, which accounted for 35% of the zinc produced
in Québec in 2004, ceased operating in October of the same
year. At the Bouchard-Hébert mine, which contributed 20%
of the zinc produced in 2004, operations are slated to end in
- In July, Noranda decided to put off development of the Perseverance
project located a few kilometres southwest of Matagami, because
of the low zinc price (US$0.44/lb). No date was given for the
resumption of operations, and the start-up of production is now
deferred to at least 2007.
Outlook for 2005
- In 2005, global consumption of refined zinc should continue
to increase, but at a more moderate rate than last year. Chinese
demand is expected to remain high. However, since production is
expected to expand slowly due to concentrates being in short supply,
the world refined zinc market should continue to exhibit a deficit.
In addition, Chinese exports may keep moving downward in 2005,
and some analysts are even suggesting that China will be a net
importer. The buoyancy of the market fundamentals for zinc should
allow the average annual price to rise again in 2005, although
more modestly than last year.