At this price, a long way from common cents Vanessa Burrow March 17, 2007
THE MARKETS
WHEN the chief executive of the Royal Australian Mint next orders a batch of 10¢ coins, she's going to have a distinct problem.
That's because the price of nickel, which makes up 25 per cent of our 5¢, 10¢, 20¢ and 50¢ coins, has more than tripled in the past year.
The shiny metal has been selling this week for $US50,075 a tonne on the London Metals Exchange, up more than $US5000 a tonne from last week's $US45,050 close.
And, according to the Mint's annual report, in 2005-06 it produced 546 million coins for circulation, a large proportion of which were 75 per cent copper and 25 per cent nickel.
One and two dollar coins will be a little less troublesome. They're 92 per cent copper, with a little aluminium and nickel.
But the price of copper has also been on the rise. After a slump early this year, the spot price has again pushed above $US6500 a tonne, or about $US3 a pound.
"I think we are probably getting towards a level at which consumers who've been conspicuous by their activity of late, particularly those in China, might start to reconsider whether they'll continue to buy at prices above $US3 a pound," said Deutsche Bank chief metals economist Peter Richardson.
There's a similar reluctance in the nickel market with stainless steel producers, which are concentrated in China, Japan, Western Europe and North America, looking to reduce the amount of nickel in their product.
"Stainless steel mills are clearly very worried by the impact on their alloying costs as a result of these increase in nickel prices," Mr Richardson said.
However, Australian nickel producers such are Minara Resources, Jervois Mining and Southern Cross Exploration are beneficiaries of the latest price jump.
On a day when the market was in the red by 16.7 points, or 0.3 per cent, on the S&P/ASX 200 Index, Minara rose 9¢ to $6.29, Jervois Mining had a 3.2 per cent increase to 3.2¢ and Southern Cross Exploration rose 12.3 per cent to 7.3¢.
But ABN Amro chief economist Kieran Davies said prices of Australia's most important commodity exports were stable.
"The key commodities in terms of our export prices are coal, which is number one, and iron ore," he said.
Coal prices are likely to fall this year and iron ore is up about 10 per cent."
Strong metal prices this week were one factor behind the performance of Victorian companies, as measured by the Deloitte Victorian Index.
They gained more ground than S&P/ASX 200 companies, and outdid the major international indices.
Companies with a market capitalisation above $10 billion were the best Victorian performers, with BHP managing to add 33¢ to last week's close in what was a turbulent week.
Deloitte partner Grant Hyde said AWB was one of the bigger movers on the 164-member index, rising from $3.19 at last week's close to $3.45 yesterday, as agricultural forecasts painted a rosier picture for grain production.
But there were some clouds on the horizon, although not the rain-bearing kind. Reserve Bank assistant governor Malcolm Edey showed surprise at the strength of economic growth in Australia and again reiterated the RBA's bias towards raising interest rates, rather than cutting them.
The speech sent the dollar back above the US79¢ mark. At 8 o'clock last night it was trading at US79.34¢.
However, the prospect of higher interest rates didn't help bank stocks. Commonwealth Bank and NAB were two of the three main laggers.
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