After retreating in July, Scotiabank’s Commodity Price Index, which measures price trends in Canada’s major exports, rebounded by 1.1% in August to a level 19.2% above a year earlier.

“The Forest Product Index led the advance, as forest fire-related restrictions on logging in southern British Columbia, amid the best U.S. homebuilding market since 1977, pushed up North American lumber prices,” says Patricia Mohr, vice president and commodities specialist, Scotia Economics.

“Base metal prices were also buoyed by a marked improvement in U.S. purchasing manager surveys, indicating at least a moderate pick-up in U.S. manufacturing activity. The start of a rebound in cattle prices, following the announcement that the U.S. would lift its ban on most beef products from Canada, and slightly firmer wheat prices boosted the Agricultural Index. The Oil and Gas Index was the only sub-component to decline in August, pushed lower by softer natural gas export prices to the United States,” she said.

According to the report, the recovery in commodity prices, since the cyclical bottom in the fall of 2001, is now broadening out from energy to industrial metals, with pulp and paper also expected to begin a stronger recovery in the fourth quarter of 2003. Prospects for a further weakening in the trade-weighted U.S. dollar, following the September 20th G7 finance ministers meeting in Dubai, also point to stronger dollar commodity prices ahead.

The rally in base metal prices, which got underway in June, has continued in August and September. LME nickel prices jumped from US$3.99 per pound in July to US$4.25 in August and are US$4.68 in mid-September — well above a year ago.

As for gold, the London PM Fix rose to US$359 per ounce in August from US$350 in July. Gold climbed again to US$385.50 in mid-September, as the U.S. Treasury Secretary — in an effort to boost U.S. manufacturing competitiveness — urged G7 nations to end major intervention in currency markets, aimed at halting the appreciation of their currencies against the U.S. dollar.

The Forest Product Index posted a strong gain in August as surging building product prices (lumber and oriented strandboard) offset declines in linerboard and uncoated freesheet paper. Newsprint prices in the United States were flat to slightly higher in August at US$495 per tonne.

The Oil and Gas Index declined in August as lower natural gas export prices from Canada more than offset a slight increase in Edmonton light crude oil and higher propane prices.