For the second month in a row, the Bank of Nova Scotia’s commodity price index jumped to a new record high, up 3.9% in April over March.

The all items index has now advanced 132.2% above the cyclical low in October 2001.

The metal and mineral index posted another record high in April, the third in as many months, and is 85.3% above the previous peak in June 1988. Many metals climbed to new heights (nickel, cobalt, lead, uranium and potash) alongside ongoing strength in China’s industrial activity (up 17.4% year-over-year in April), the global upswing in metal-intensive investment in processing plant, oil and gas drilling and pipelines and booming aircraft orders.

Cash-rich mining companies are moving to strengthen their position in the global marketplace in what is turning out to be an extended ‘super-cycle’ for metal prices. The opening up of many emerging economies in Southeast Asia, the Middle East, Russia, the Baltic States and Eastern Europe, as well as strong projected growth in China and India, has more than offset the marked slowdown in the United States over the past year and points to a period of sustained demand growth for metals and minerals.

“The recent acquisition of Canada’s two largest nickel producers, as well as a host of prospective smaller transactions, reflects expectations that the international supply/demand balance for nickel will remain in deficit through the first half of 2008,” says Patricia Mohr, vp, economics and commodity market specialist at Scotiabank. “While prices will eventually unwind from today’s spectacular levels, prices should remain quite elevated over the balance of the decade, given only a handful of planned major mining developments and strong trend growth in stainless and specialty steel demand.”

The driving force behind the recent bid for Canada’s largest aluminium company by a U.S.-based producer appears to be less related to expectations of high aluminium prices and more to the need to bolster market position and clout in a rapidly changing global environment. China’s capacity expansion in aluminium has been breathtaking since 2003, up 22.3% per annum, with China quickly emerging as the world’s top producing country with 32% of global output and Chalco the world’s fourth largest smelter. A Russian company has recently catapulted into the top position in aluminium, with the merger of three companies. The net result, industry concentration has increased substantially in aluminium, nickel and copper in the past year, with the top five producers now accounting for 40.1%, 51.5% and 39.7% respectively of world production.

Spot uranium prices have advanced to US$125 per pound in late May, up 73.6% since late 2006. Global interest in nuclear power continues to grow, with 252 new reactors now under construction, scheduled or proposed. LME nickel prices are over US$23 per pound in late May, 142% above a year earlier, and prices for steel alloying agents (molybdenum and cobalt) are robust.

West Texas Intermediate (WTI) crude oil prices have increased from US$60.74 per barrel in March to US$65.20 in late May, a substantial rebound from weather-related weakness in early 2007. Low U.S. gasoline inventories, linked to unusually heavy refinery outages and maintenance ahead of the driving season (with aging refineries now being upgraded) pushed up average U.S. retail gasoline prices to US$3.26 per gallon on May 21, a record level in data back to 1993, even surpassing the spike in the aftermath of Hurricane Katrina. The strength of crude oil prices also reflects a fairly snug world supply/demand balance.

The forest product index also inched up in April, as northern bleached softwood kraft pulp prices rose to the highest level since early 1996 and U.S. fine paper prices showed surprising strength, more than offsetting further slippage in lumber.

The agricultural index strengthened in April. Cash canola prices (FOB Vancouver) rose from US$331 per tonne in March to US$337 (up 37% year-over-year), though Canadian dollar appreciation will reduce receipts for Prairie farmers. Demand for vegetable oils is strong in China and India and a shift in plantings by U.S. farmers away from soybeans to corn for ethanol has propelled soyoil prices to record highs. Canadian canola/rapeseed breeders are focusing on developing high-omega canola varieties that produce canola oils with zero trans-fat in processed products.