(December 21 – 13:30 ET) – With a 3.6% surge in November, Scotiabank’s Commodity Price Index ended the 1990s on a strong note. The All Items Index has advanced by 17.4% from the October 1998 low and has returned to mid-1997 levels when the Asian crisis began to affect resource demand. The inflation-adjusted gain is 12.2% year-over-year.

“Asia, outside of Japan, has recovered faster than expected and prospects for synchronized world economic growth – as strengthening overseas economies offset moderating U.S. domestic demand – should provide a better underpinning for commodity prices. Shareholder value creation in forest products will be enhanced by recent industry restructuring and further consolidation in pulp & newsprint. U.S. paper & paperboard capacity from 2000-02 will expand by the slowest pace in more than 25 years – tightening North American supplies and lifting prices,” says Patricia Mohr, Vice-President and commodities specialist, Scotia Economics.

In November, the Forest Products Index rose by a hefty 7.8% with a rebound in lumber and oriented strandboard prices and broad-based strength in pulp & paper. “Dot-com companies are also advertising heavily in magazines to gain consumer recognition for their web sites. As emerging economies recover and global marketers position their brands as leaders for the new millennium, print advertising around the globe — so critical for pulp & paper — should gather further strength.”

“An 8.7% year-over-year increase in scheduled vehicle assemblies in Canada, the United States and Mexico will boost demand even further early next year. While U.S. vehicle output will eventually edge down in 2000 — as consumer replacement demand wanes — the growing use of lightweight alloys in many North American vehicles will underpin consumption,” comments Mohr.

The Agricultural Index strengthened in November alongside firmer cattle, wheat and barley prices. Wheat prices edged up to US$149 per tonne, but remain well below US$166 in November 1998.

“Wheat prices continue to be pressured by fierce international competition, aggressive European export subsidies and high projected U.S. carryover stocks, and are unlikely to mount a significant rebound until the next crop year,” concludes Mohr.
-IE Staff