After a sharp drop in January, Bank of Nova Scotia’s Commodity Price Index, which measures price trends in 32 of Canada’s major exports, bounced back strongly in February, to within 0.6% of December’s record high.

Despite the pullback in copper and zinc prices in early 2007, the Metal and Mineral Index reached a new record high in February, as nickel prices soared to extraordinary levels, uranium prices continued to climb and lead prices reached a new record. Investment & pension fund interest in copper – as well as other commodities – also picked up again in mid-February, with copper prices likely over-sold earlier in the month, and growing expectations that China’s fabricators will need to restock copper, after using inventories on hand last year.

“China’s industrial production accelerated in January and February — up 18.5% yr/yr from 14.7% in December – also bolstering expectations”, said Patricia Mohr, vp, economics and commodity market specialist at Scotiabank, in a news release.

London Metal Exchange (LME) nickel prices climbed from US$16.60 per pound in January to US$18.68 in February and a spectacular new record high of US $22.84 on March 19, more than double the previous cyclical peak of US$10.84 in March 1988. Extraordinary nickel prices reflect strong global stainless steel production, especially in China, where capacity gains will account for 67 per cent of the world increase in 2006/2007. “While stainless steel and nickel prices could edge down at some point this year, a ‘super-cycle’ is likely for nickel, with prices remaining quite elevated for the next several years”, says Mohr. The market remains concerned over only limited prospects for new nickel supply.

Spot uranium prices also continue to soar, rising to US$95 per pound in late March – a 32% gain since early 2007. Aside from very tight international supply/demand conditions, the latest price increase reflects the force majeure on sales contracts of the Ranger mine in Australia, due to heavy rainfall from Cyclone George, with first-quarter 2007 output expected to be 20-30% below a year earlier.