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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (26416)	9/20/1999 6:37:00 PM
From: russet	Respond to of 99985

Scotiabank commodity price index falls in August Bank of Nova Scotia Mon 20 Sept 99 News Release Ms. Patricia Mohr reports After seven consecutive monthly gains, the Scotiabank commodity price index, which measures price trends in Canada's major exports, fell by 2.9 per cent in August. However, the all items index is expected to resume its upward trend in the fall alongside surging oil and gas prices and widespread gains in pulp and paper. "A temporary decline in the forest products index and continuing weakness in agricultural prices offset a further advance in the oil and gas and metal and mineral indices," said Patricia Mohr, vice-president and commodities specialist for Scotia Economics. "Lumber and oriented strandboard prices fell back from exceptionally strong levels in July as buyers anticipated a peaking of U.S. housing starts. Excessive global oilseed and feed grain supplies also curbed Canadian canola and barley prices helping to contain broader-based measures of inflation, but severely pressuring farm incomes." The forest products sector is currently undergoing a rotation, with expectations of a decrease in North American demand for building products, but gathering strength in pulp and paper. In September, northern bleached softwood kraft pulp producers easily implemented a $40 (U.S.) price hike in U.S. and European markets. U.S.list prices for NBSK have climbed 18 per cent from a low of $490 (U.S.) per tonne in February to $580 (U.S.) -- a particularly welcome development for B.C. producers who account for a large portion of world market pulp capacity. "Fine paper markets in the U.S. and Europe have strengthened considerably in mid-1999, partly due to the millennium effect -- strong print advertising related to the new millennium. U.S. magazine ad pages have advanced by a solid 3.1 per cent through August and will likely surge in the fourth quarter," said Ms. Mohr. "A jump in catalogue printing for the coming holiday season will warrant an October $50 (U.S.) to 60 (U.S.) per short ton increase in U.S. contract prices for lightweight coated No. 5 paper. In addition, European papermakers have reduced their exports to the United States alongside improving domestic market conditions, thereby tightening U.S. supplies." Also in August, U.S. uncoated freesheet prices for bond and copy paper rose by $35 (U.S.) to $665 (U.S.) per short ton. In September, papermakers, including Canadian exporters, are implementing a further $60 (U.S.) increase. A surge in document reproduction to avoid any Y2K problems will contribute to a 4 per cent to 4.5 per cent increase in U.S. consumption this year, followed by a temporary lull in early 2000. In mid-September, West Texas Intermediate crude oil prices surged well over $24 (U.S.) per barrel, up from only $19.07 (U.S.) in July. OPEC (excluding Iraq) reduced output by 110,000 b/d in August and was 92-per-cent compliant with pledged production cuts, pulling more than 5.5 per cent of world supplies off the market. "The OECD oil inventory overhang is rapidly being eliminated, pointing to a further price surge in the fourth quarter. Oil and product stocks are now 3 per cent below the average of the 1990s in the U.S. and 9 per cent below the average in the Far East. European inventories remain 4-per-cent above average, but will soon fall below normal," said Ms. Mohr. "The global oil inventory overhang that built up during the Asian crisis is almost gone."