Scotiabank Commodity Commodity Market Research Price Indices - - PDF document

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cotiabank’s Commodity Price Index soared to a new peak in September — the second in as many months — and has doubled since the October-2001 cyclical low. The All Items Index jumped by 9% month-over-month — the third-biggest monthly gain on record (in data back to 1972). The largest gain occurred in August 1973 in the lead-up to the Arab oil embargo. This time, Hurricanes Katrina and Rita contributed to the surge by disrupting Gulf of Mexico oil & gas production, by damaging stockpiled building materials on U.S. Gulf Coast docks and through the temporary suspension of zinc deliveries from the LME warehouse in New Orleans. The Oil & Gas Index soared to new heights in September, as Edmonton light crude oil, propane and natural gas export prices all climbed to new records — offsetting a decline in Hardisty, Alberta medium/heavy crude oil. Canadian natural gas export prices have doubled over the past year and will move even higher in October (in lagged response to soaring Nymex prices, which reached a record US$14.22 per mmbtu on October 4 — up from US$7.37 a year earlier). Canada’s merchandise trade surplus in natural gas has more than tripled since the late 1990s, when prices were in the US$2 range, and will likely surpass C$40 billion this autumn (the biggest single contributor to Canada’s overall trade surplus). The value

• f Canada’s natural gas exports (virtually all to the United States) now

exceeds Canada’s global exports of forest products (wood products and pulp, paper & paperboards). The Metal & Minerals Index also climbed to a new record in September, its second of the past two months. Similar to recent patterns in the crude

• il market, major supply disruptions (either strikes or production

difficulties) have exacerbated already tight world supply/demand conditions for copper cathodes and zinc concentrates — driving prices

• higher. The Forest Products Index also strengthened last month, as lumber

and OSB prices snapped back from recent weakness — buoyed by prospects for rebuilding in the U.S. Gulf in the wake of Hurricanes Katrina and Rita (now followed by Wilma in Florida). Finally, the Agricultural Index edged up alongside stronger wheat and barley prices.

Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1-4 Industrial Price Forecasts . . . . . . . . . . . . . . . . . . . . . . .4 All Commodity Price Index . . . . . . . . . . . . . . . . . . . . .5 Industrial Commodity Index . . . . . . . . . . . . . . . . . . . .6 Metal and Mineral Index . . . . . . . . . . . . . . . . . . . . . . .6 Key Industrial Metal Prices . . . . . . . . . . . . . . . . . . . . .7 Gold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Forest Product Index . . . . . . . . . . . . . . . . . . . . . . . . . .9 Key Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Oil and Gas Index . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Key Energy Prices . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Agricultural Index . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Key Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Technical Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

• Canadian natural gas export prices double over the past year.
• Zinc — a rising star for 2006 — critically tight concentrate supplies push up prices.
• Uranium prices expected to reach US$40 by late 2006.

Scotiabank Commodity Price Indices

Global Economic Research

Scotiabank’s Commodity Price Index Climbs to New Record in September — Boosted by Hurricanes Katrina and Rita

Scotiabank Commodity Price Indices is available on: www.scotiabank.com, Bloomberg at SCOE and Reuters at SM1C

72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 40 60 80 100 120 140 160 40 60 80 100 120 140 160 Index: 1997=100 All Items

Scotiabank Commodity Price Index Climbs To New Peak

——— A trade-weighted U.S. dollar-based index of principal Canadian

• exports. Shaded areas represent U.S. recession periods.

October 2001 Bottom

New record high in September 2005 100.2% above cy clical low

Patricia M. Mohr (416) 866-4210 Vice-President, Industry & Commodity Market Research

October 25, 2005

72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 40 80 120 160 200 240 280 320 360 40 80 120 160 200 240 280 320 360 Index: 1997=100 New Record High

Scotiabank Oil and Gas Price Index

Canada's T rade Surplus in Natural Gas (C$bn, annual rate) 1999 11.0 2000 20.5 2004 27.4 2005:Aug 39.0

Oil & Gas

West Texas Intermediate crude oil prices rose from US$64.99 per barrel in August to US$65.55 in September, before receding to US$62.64 so far in October. Prices touched an intra-day trading record

• f US$70.85 on August 30, just as Hurricane Katrina reached New Orleans. While remaining high

and volatile, the impact of Hurricane Rita on WTI oil prices was muted by the sale or loan of U.S. ‘Strategic Petroleum Reserves’ and the release of crude oil & product reserves from other International Energy Agency (IEA) countries (roughly 900,000 b/d of mainly crude oil, but also some gasoline and other products from early September through mid-October). The IEA has recently decided that any unplaced oil from its ‘initial emergency release’ will remain available to the market. WTI oil prices have moderated further to just above US$60 in mid-October — dampened by U.S. Department of Energy data, indicating ‘demand destruction’ from high petroleum prices. Overall petroleum ‘products supplied’ (a measure of deliveries to users) have fallen by 3.2% yr/yr in the four weeks ending on October 14. Similar data indicate a 2.2% yr/yr drop in deliveries of gasoline and a 4% yr/yr decline in middle distillates. While U.S. consumers have no doubt cut back on consumption of gasoline as a result of recent record prices, it should be pointed out that this data does not measure true underlying ‘consumption’. Supply disruptions from shutdown pipelines and damaged processing infrastructure, as well as economic dislocation in the U.S. South, have also contributed to lower ‘deliveries’. U.S. consumption of petroleum products will likely rebound in coming months. The above developments, plus a surge in imports of refined products, have bolstered the inventory position in the United States. U.S. stocks of crude oil & products are currently 3.2% above a year earlier. Crude oil inventories have climbed 12% yr/yr, alongside reduced Gulf Coast refinery runs and the release of strate- gic petroleum reserves. Middle distillate stocks are 1.3% above a year ago (not particularly comfortable, with the heating season starting on November 1), while gasoline stocks remain 4.2% below a year earlier. Turning to natural gas, Nymex prices jumped from US$9.43 per mmbtu in August to US$12.11 in September and reached a record US$14.22 on October 4. Prices have eased back to US$13.02 in mid-October — still exceptionally high compared with US$7.37 in October 2004. Unlike crude oil, North American natural gas markets are largely land-locked, with imports

• ffering little relief to offset lost production from the U.S. Gulf. LNG imports accounted for only

2.9% of U.S. consumption in 2004. A 10-day outage at the Lake Charles LNG terminal, in the wake

• f Hurricane Rita, and tough competition for cargoes with European buyers also cut third-quarter LNG
• supplies. However, it appears likely that the extremely high prices of the past two months have

caused genuine ‘demand destruction’, particularly in the industrial sector (more so than in the case of crude oil). There has likely been some shift from natural gas to fuel oil for electricity

• generation. This development, as well as the impact of damaged electricity lines in the U.S. Gulf, may

be behind the recent surprising increase in U.S. natural gas-in-storage. Natural gas output still shut in, (including evacuations ahead of Wilma), represents 54.7% of normal Gulf of Mexico output (10 bcf/d). Despite the recent equity market correction, our energy price forecasts for 2006 remain unchanged — about US$60 per barrel for WTI oil and US$9 for Nymex natural gas — levels guaranteeing exceptionally strong financial results for Canadian oil & gas producers. Today’s tight North American supply/demand balance for natural gas is unlikely to ease significantly until 2008, when six new U.S. LNG import terminals come on stream.

Metals & Minerals

The Metal and Mineral Index advanced to a new record in September — 2% above the June-1988

• peak. Widespread gains in most base metals, precious metals, uranium and potash offset slightly lower

prices for nickel, aluminium and cobalt. LME copper prices climbed from US$1.72 per pound in August to US$1.75 in September and spiked to almost US$1.90 on October 20. Copper is now 19% above its US$1.59 peak in December 1988 — a time of very strong base metal prices. Current prices are quite lucrative, yielding a 111% profit margin over average Western World break-even costs (including depreciation) of US$0.61. Strong profitability has recently extended the life of the Highland Valley mine in the B.C. Interior. Global copper supplies are critically tight and investment fund interest remains high (the funds are afraid to short this market, given extremely low stocks). World consumption has slowed markedly this year

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00 02 04 06 1.4 1.6 1.8 2.0 5 6 7 8 million units, annualized

U.S. Housing "Boom" Continues

U.S. Housing Starts* 30-y r U.S. Mortgage Rates per cent Large Order Backlog Underpins Construction ——— * September 2005: 2.108 million units. 00 02 04 06 35 40 45 50 55 60 65 70 100 200 300 400 500 600 700 800 US$/lb.

Zinc -- Improving Fundamentals

LME Zinc Prices LME Inventories thousands of tonnes 72 76 80 84 88 92 96 00 04 10 20 30 40 50 10 20 30 40 50 US$ per pound

Uranium Prices Headed Towards 1980 Peak

Arab Oil Embargo US$43.40 Peak T hree Mile Island

U3O8

Russian HEU Agreement Cancelled Options Low US$7.10 in Dec 2000 Nuclear Disarmament October 2005 Spot US$33.00 LT Contract US$33.00

85 90 95 00 05 10 400 600 800 1,000 400 600 800 1,000 US$/tonne

Pulp Prices Climb US$20 in October

NBSK Pulp Prices Delivered to USA ——— Northern bleached softwood kraft pulp prices; relatively modest cyclical expansion. Price increases needed to cover rising energy & freight costs.

(especially in G7 countries) — partly due to high prices and substitution by plastics in applications such as plumbing tube. However, global demand remains higher than the ability

• f smelters to produce metal. Global smelter

bottlenecks have continued in the face of difficulties in commissioning smelter expansion in India and Thailand. About 500,000 tonnes of smelter production and 900,000 tonnes of mine production have been lost in 2005 due to strikes and production difficulties. Copper prices are expected to gradually lose momentum over the next several years, as substantial new smelter capacity is brought on stream (especially in China in late 2006 and early 2007). However, the precise timing of price unwinding is difficult to pinpoint. After lagging other base metals, zinc prices have strengthened markedly in 2005. LME zinc prices spurted from US$0.59 per pound in August to US$0.63 in September and a high of US$0.69 on October 20 — well above US$0.48 in October 2004. LME inven- tories of slab zinc have declined to 500,100 tonnes in mid-October from 629,425 tonnes at the end of 2004, though stocks remain much higher than for copper. However, supplies of zinc concentrates are very tight — constraining international smelter

• utput and pushing up prices. Treatment charges for ‘custom’ smelters have fallen to record lows and will likely drop further

in the coming year, benefitting miners. Strikes at Canadian smelters have also cut supplies. While zinc prices could ease back temporarily, when the Kidd Creek strike ends, prices should move irregularly higher in 2006-07. Spot uranium prices (U3O8) have strengthened from US$30.20 per pound in late August to US$31.25 in late September and reached US$33.00 in mid-October — well above US$20.25 a year ago. Prices are expected to climb over US$40 by late 2006 — approaching the previous peak of US$43.40 in May 1978. Increases in global mine supply will be quite limited until 2007, when Saskatchewan’s Cigar Lake mine starts up and Kazakhstan may be able to significantly boost output. It is important to note that a doubling of uranium prices (U3O8) only increases the cost of producing nuclear power by 3.5% - increasing the competitiveness of nuclear over gas and oil-fired electricity generation. There will be little ‘demand destruction’ from rising uranium prices.

Forest Products

After losing ground in July and August, the Forest Products Index bounced back in September. Western Spruce-Pine-Fir 2x4 lumber prices jumped from US$299 per mfbm in August to US$337 in September, though prices have retreated again to US$308 in mid-October. OSB prices in the bellwether U.S. North Central region also rallied back, with an even stronger gain from US$253 per thousand sq. ft. in August to US$380 in September (US$413 late in the month). OSB prices are currently US$395. Prices were pushed up in September by panic buying to replenish inventories in the wake of Hurricane Katrina and ahead of Rita, given temporary mill closures and lost inventories. However, buyers have stepped back from the market in October, in view of seasonally slower building activity over the winter. Dealers will likely step up their orders again by early 2006, given prospects for rebuilding in the U.S. Gulf. U.S. housing starts rose in September to a very robust 2.108 million annual rate. Despite the Hurricanes, starts actually strengthened in the U.S. South to 981,000 units. While 30-year mortgage rates have recently climbed above 6%, rates remain within a percentage point of the four-decade low of 5.21% in June 2003. Building activity is also being underpinned by a large

• rder backlog (15.5% higher than in September 2004). So far this year, U.S. housing starts have averaged 2.07 million units

compared with 1.95 million in 2004. Canada has won the NAFTA litigation on the Canada/U.S. softwood lumber dispute, given the recent ruling by the Extraordinary Challenge Committee, finding that Canadian lumber shipments during the period of investigation were not a ‘threat of material injury’ to U.S. producers. However, because the United States refuses to accept the outcome, a NAFTA bi-national panel continues to rule on the Department of Commerce’s determination of subsidy. The Panel has instructed the DOC to issue a new remand determination by October 28, potentially reducing the deemed subsidy rate to less than 1% or ‘de minimis’.

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Scotiabank Commodity Price Indices

Weights One Three One Five Ten Month Months Year Years Years All Commodity Price Index 100 182.2 66.2 26.2 9.0 4.4 Industrials 83 222.5 76.4 28.5 9.7 5.1 Forest Products 40 130.9 3.0

• 6.9

2.2

• 1.3

Metal and Minerals 27 10.2 12.7 26.7 11.2 3.7 Oil and Gas 16 795.0 279.3 73.4 15.5 17.3 Agriculture 17 0.4 5.4 10.3 4.4 0.4 2005 2004 Sept Aug July June Sept All Commodity Price Index* 165.7* 152.0* 148.3 146.0 131.3 Industrials* 177.3* 160.8* 156.2 153.9 138.0 Forest Products 104.2 97.2 100.7 103.5 111.9 Metal and Minerals 159.1 157.8 152.7 154.4 125.6 Oil and Gas* 382.4* 318.6* 295.5 274.0 220.6 Agriculture 108.2 108.1 108.9 106.8 98.1

*Natural gas prices are subject to revision.

Growth Trends (per cent change at annual rates) Index 1997 = 100

Newsprint prices in the U.S. market edged up from US$612 per tonne in August to US$615 in September (48.8 gsm). Producers are starting to implement the third price increase of 2005, announcing a US$35 hike for October. While newsprint consumption by U.S. daily publishers has dropped by 4.9% in the year through September, the closure of 500,000 tonnes of capacity in Eastern Canada this fall will tighten North American supply/demand conditions, permitting about US$25 of this increase to go through by early 2006.

Agriculture

The Agricultural Index inched up in September as slightly stronger wheat, barley and cattle prices offset moderate declines in canola and hogs. The Canadian Wheat Board’s asking export price for No. 1 grade wheat rose from US$190 per tonne in August to US$202 in September — above US$185 a year earlier (at Gulf of St. Lawrence ports). World supply/demand conditions for wheat have tightened recently, given a large reduction in the expected European Union crop, more than offsetting an increase in the harvest in Russia and the Ukraine. However, the above prices may somewhat overstate increased netbacks to farmers, as expected higher rail freight to export terminals must be netted out. Washington may eventually remove anti-dumping and countervail duties (totalling 11.4%) on imports of Canadian hard red spring wheat, given recent NAFTA panel decisions in favor of Canada.

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1999 2000 2001-02 2003 2004 2005F 2006F Average Oct 24 Average (U.S. dollars per tonne) Newsprint1 510 560 516 493 544 615 (Sept) 599 640 Pulp1, Northern Bleached Softwood Kraft 543 685 518 553 640 640 647 620 Supercalendered A Paper1 (U.S. dollars per ton) (35 lb. offset) 803 820 739 675 713 780 769 775 (Sept)

• No. 3 Offset Paper1

(uncoated freesheet, 50 lb. rolls) 646 730 677 622 658 690 709 730 (Sept) Linerboard1, 42 lb. 383 453 383* 367* 411* 380* 409* 420* (2002) (Sept) Lumber, Western (U.S. dollars per mfbm) Spruce-Pine-Fir 2×4s 368 282 269 267 386 308 343 330 (U.S. dollars per thousand sq. ft.) Oriented Strandboard (OSB)2 259 207 159 293 371 395 325 280 (U.S. dollars per pound) Zinc3 0.49 0.51 0.38 0.375 0.475 0.67 0.61 0.70 Aluminium3 0.62 0.70 0.63 0.65 0.78 0.87 0.84 0.75-0.80 Nickel3 2.73 3.92 2.89 4.37 6.27 5.41 6.64 6.00 Copper3 0.71 0.82 0.71 0.81 1.30 1.82 1.63 1.40 (U.S. dollars per ounce) Gold4 279 279 291 363 409 466 443 475 West Texas Intermediate (U.S. dollars per barrel) Crude Oil 19.25 30.20 25.99 31.04 41.40 60.08 57.25 60 Natural Gas, (Cdn dollars per mcf) Average Alberta Plantgate 2.55 4.50 4.64 6.12 6.31 7.86 8.65 8.65 (Aug) (U.S. dollars per mmbtu) 2.31 4.32 3.70 5.50 6.19 13.02 9.00 9.00 (9.00-10.00)

Industrial Commodity Price Outlook

Forest Products Metals Oil & Gas Nymex Natural Gas

1 Delivered to the Eastern U.S. 2 U.S. Northcentral region 3 LME Base metals 4 London PM Fix *Revised from list to transactions prices.

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72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 40 60 80 100 120 140 160 40 60 80 100 120 140 160

2

All Items — Inflation adjusted

Index: 1997 = 100

Scotiabank All Commodity Price Index

All Items

Grow th T rends (per cent, annual rate) Last Year 26.2 Last 5 Years 9.0 Last 10 Years 4.4

• 1. A trade-weighted U.S. dollar-based index of principal Canadian exports.
• 2. Index deflated by U.S. Producer Price Index for Intermediate Goods.

– Shaded areas represent U.S. recession periods.

1

2005 2006 120 140 160

plotted to Sept/05

All Items 2005 2006 32 34 36 38 40 All Items – Inflation Adjusted

plotted to Sept/05

2005 2006 1 2 3 4 U.S. CPI*

plotted to Sept/05 * Year-over-year per cent change.

80 82 84 86 88 90 92 94 96 98 00 02 04 06 70 80 90 100 110 120 130 140 150 160 170 65 70 75 80 85 Canadian Dollar

Index: 1997 = 100

Scotiabank All Commodity Price Index

Canadian Dollar vs. Commodity Prices

US cents

Shaded areas represent U.S. recession periods. 2005 2006 75 80 85 Canadian Dollar *

*October 24, 2005

plotted to Sept/05

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72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 40 60 80 100 120 140 160 180 40 60 80 100 120 140 160 180

Index: 1997=100

Scotiabank Industrial Commodity Price Index 1

• 1. A trade-weighted U.S. dollar-based index of principal Canadian exports;

index includes forest products, metals and minerals, and oil & gas. – Shaded areas represent U.S. recession periods. Growth T rends (per cent, annual rate) Last year 28.5 Last 5 years 9.7 Last 10 years 5.1

2005 2006 140 160 180

plotted to Sept/05

Industrial Index

Growth T rends (per cent, annual rate) Last year 26.7 Last 5 years 11.2 Last 10 years 3.7

72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 50 70 90 110 130 150 50 70 90 110 130 150

Index: 1997=100

Scotiabank Metal and Mineral Price Index

Shaded areas represent U.S. recession periods.

2005 2006 115 130 145 160 Metal and Mineral Index

plotted to Sept/05

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72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 20 40 60 80 100 120 140 160 180 20 40 60 80 100 120 140 160 180

U.S. cents per lb.

Selected Industrial Metal Prices

• 1. LME cash copper and aluminium.
• 2. U.S. producers' price zinc to August 1990; LME price thereafter.

– Shaded areas represent U.S. recession periods.

Aluminium1

1

Copper Zinc

2

72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9

U.S. dollars per lb.

Nickel Prices

LME cash settlement price since 1980. – Shaded areas represent U.S. recession periods.

2005 2006 110 130 150 170 Copper Prices

plotted to Sept/05

2005 2006 75 85 Aluminium Prices

plotted to Sept/05

2005 2006 50 60 70 Zinc Prices

plotted to Sept/05

2005 2006 5.00 6.00 7.00 Nickel Prices

plotted to Sept/05

2005 2006 15 20 25 30 Cobalt Prices

U.S. dollars per lb. plotted to Sept/05

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72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 100 200 300 400 500 600 700 800 20 40 60 80 100 120 140 160

thousands of Yen per ounce

International Gold Prices (Euro & Yen)

Euros per ounce *ECU from April 1990 to December 1998, Euro thereafter.

• Price on October 24, 2005: 53,713 Yen, 388 Euros.

Euro* Yen 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 100 200 300 400 500 600 100 200 300 400 500 600

International Gold Prices (U.S. Dollar)

per ounce Price on October 24, 2005: 466.10 U.S. dollars.

2005 2006 320 360 400 440 480 520 32 36 40 44 48 52

plotted to Sept/05

Gold Prices

October 24, 2005 * Yen + Euro Yen + * Euro

2005 2006 425 450 475

plotted to Sept/05

Gold Prices

*October 24, 2005

*

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Index: 1997=100

Scotiabank Forest Product Price Index

Shaded areas represent U.S. recession periods. Growth T rends (per cent, annual rate) Last Year

• 6.9

Last 5 years 2.2 Last 10 years

• 1.3

72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 50 70 90 110 50 70 90 110 2005 2006 90 100 110 120

plotted to Sept/05

Forest Product Index 2005 2006 725 750 775

U.S. dollars per ton plotted to Sept/05

Supercalendered Paper 2005 2006 200 300 400 500 OSB Prices

plotted to Sept/05 U.S. dollars per thousand sq.ft.

72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 100 200 300 400 500 600 700 800 900 1000 100 200 300 400 500 600 700 800 900 1000

U.S. dollars per mfbm

Selected Forest Product Prices

U.S. dollars per tonne

Lumber New sprint

1

Pulp 1

2

• 1. Newsprint and pulp delivered to U.S.A.
• 2. Western S.P.F. 2x4 lumber.

– Shaded areas represent U.S. recession periods.

2005 2006 550 600 650 700

plotted to Sept/05

Pulp Prices 2005 2006 550 600 New sprint Prices

plotted to Sept/05

2005 2006 250 350 450

plotted to Sept/05

Lumber Prices

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72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 40 80 120 160 200 240 280 320 360 40 80 120 160 200 240 280 320 360

Index: 1997=100

Scotiabank Oil and Gas Price Index

Shaded areas represent U.S. recession periods. Growth T rends (per cent, annual rate) Last year 73.4 Last 5 years 15.5 Last 10 years 17.3

72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 10 20 30 40 50 60 70 80 90 100 110 1 2 3 4 5 6 7 8 9 10 11

+ U.S. dollars per mcf

Selected Canadian Energy Export Prices

U.S. dollars per bbl

Natural Gas Light Oil

* ——— – Shaded areas represent U.S. recession periods. + NEB average at the Canada/U.S. border; estimates for the last two months are subject to revision. * Edmonton par oil price. * Light oil price estimate for October 2005: U.S. $64.22

2005 2006 200 250 300 350

plotted to Sept/05

Oil & Gas Index 2005 2006 25 30 35 40 45 50 55 60 65

Edmonton Par Light Hardisty Heavy

Crude Oil Prices

plotted to Sept/05 U.S. dollars per barrel.

2005 2006 5 6 7 8 9 10 11 12 13 14 Natural Gas Prices

NYMEX** NEB Average Export* * Average short and long-term contract price; estimates for last two months; U.S. dollars per mcf. ** Monthly average of daily NYMEX nearby futures prices; U.S. dollars per mmbtu. plotted to Sept/05

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72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 50 70 90 110 130 50 70 90 110 130

Index: 1997=100

Scotiabank Agricultural Price Index

Growth T rends (per cent, annual rate) Last year 10.3 Last 5 years 4.4 Last 10 years 0.4 Shaded areas represent U.S. recession periods.

72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 20 30 40 50 60 70 80 20 30 40 50 60 70 80

1 2

U.S. dollars per tonne

Selected Agricultural Prices

U.S. dollars per cwt

W heat Cattle Hogs

• 1. Canadian Wheat Board asking export price #1 CWRS.
• 2. Cash cattle and hogs at Toronto; from January 1993 average of Ontario markets.

72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 120 160 200 240 280 120 160 200 240 280

2

2005 2006 100 110

plotted to Sept/05

Agricultural Index 2005 2006 240 280 320 Canola Prices

plotted to Sept/05 U.S. dollars per tonne

2005 2006 140 160 180 200 220 240

plotted to Sept/05

W heat Prices 2005 2006 40 50 60

plotted to Sept/05

Hog Prices 2005 2006 50 60 70 80

plotted to Sept/05

Cattle Prices

This Index has been designed to track the spot or transactions prices paid for key Canadian commodities in export markets. The weight of each component is based upon its export value from 1995-97, with the excep- tion of crude oil & refined products, uncoated freesheet paper and liner- board, where the value of net exports is used. Canada imports a significant quantity of these products. For this reason, use of the export value would overstate the importance to Canada's trade performance. The following prices are included:

Forest Products

Lumber, Western Spruce-Pine-Fir 2x4 Standard and Better (US$ per mfbm) f.o.b. mill. Oriented Strandboard, (US$ per thousand sq. ft.) US North Central region, 7/16 inch. Pulp, Bleached Northern Softwood Kraft (US$ per tonne) Transactions price, delivery U.S.A. Newsprint (US$ per tonne) Average transactions price, delivery Eastern U.S.A. Groundwood Specialty Papers (US$ per ton), Supercalendered A paper, 35 lb., delivery U.S.A. Uncoated Freesheet Paper (US$ per ton), No.3 offset, delivery U.S.A. Linerboard (US$ per ton), delivery Eastern U.S.A. with zone dis- counts.

Metals & Minerals

Copper (US$ per lb) Official LME cash settlement price for grade A copper. Zinc (US$ per lb) U.S. producers' price for high-grade zinc, delivered; since Sept. 1990, LME SHG cash settlement. Lead (US$ per lb) U.S. producers' price for common grade, delivered; since Jan.1991, LME cash settlement. Aluminium (US$ per lb) since 1979, LME cash settlement. Nickel (US$ per lb) since 1980, LME cash settlement price. Molybdenum (US$ per lb) since March 1992, MW dealer oxide. Gold (US$ per oz) Final price for gold established by consensus of London dealers, 99.5 per cent fine gold. Silver (US$ per oz) Handy and Harman base price, New York area delivery, 99.9 per cent purity. Potash (US$ per tonne) Standard potassium chloride, spot price, f.o.b. Vancouver. Sulphur (US$ per tonne) Solid, spot price, f.o.b. Vancouver. Metallurgical Coal (US$ per tonne) Long-term contract price. Uranium (US$ per lb) U308, restricted market. Cobalt (US$ per lb) MW dealer price.

Oil and Gas

Crude Petroleum & Refined Products (US$ per bbl) since 1986-87, Edmonton par crude and Bow Valley heavy crude at Hardisty. Natural Gas (US$ per mcf) Average export price quoted by the National Energy Board. Liquid Petroleum Gas (US$ per bbl), Propane at Edmonton and Sarnia.

Agriculture

Wheat and Flour (US$ per tonne) Canadian Wheat Board asking export price, #1 CWRS, 13.5 per cent protein at St. Lawrence. Barley (US$ per tonne) since Dec. 1994 at Lethbridge Alberta. Canola (US$ per tonne) #1 Canada in store Vancouver. Cattle and Beef (US$ per cwt) Steers over 1,051 pounds at Toronto; from January 1993, Ontario average. Hogs and Pork (US$ per cwt) 100 Index hogs at Toronto; from January 1993, Ontario average. Fish and Seafood (US$ per lb) West Coast silver coho salmon; Atlantic lobster prices, prior to 1986 cod fillets and blocks.

Technical Note Scotiabank Commodity Price Index — Principal Canadian Exports 1997 = 100

Scotiabank Commodity Price Index – Components And Weights

Index Export Value Index Components In 1995-97 Weight (millions of dollars) (per cent) Forest Product Index 33,497 39.8 Lumber 13,947 16.6 Oriented Strandboard 1,003 1.2 Pulp 8,238 9.8 Newsprint 7,587 9.0 Groundwood Specialty Papers 1,716 2.0 Uncoated Freesheet 524 0.6 Linerboard 482 0.6 Metal and Mineral Index 22,576 26.8 Copper 3,166 3.7 Zinc 1,516 1.8 Lead 358 0.4 Aluminium 6,201 7.4 Nickel 2,165 2.6 Molybdenum 107 0.1 Gold 3,266 3.9 Silver 321 0.4 Potash 1,680 2.0 Sulphur 403 0.5 Coal 2,344 2.8 Uranium 686 0.8 Cobalt 363 0.4 Oil and Gas Index 13,943 16.6 Crude Oil & Refined Products 4,786 5.7 Natural Gas 6,992 8.3 Liquid Petroleum Gas 2,165 2.6 Agricultural Index 14,099 16.8 Wheat and Flour 4,157 4.9 Barley and Feedgrains 981 1.2 Canola and Oilseeds 2,317 2.8 Cattle and Beef 2,194 2.6 Hogs and Pork 1,496 1.8 Fish & Seafood 2,954 3.5 TOTAL INDEX 84,115 100.0 12

This Report is prepared by Scotia Economics as a resource for the clients of Scotiabank and Scotia Capital. While the information is from sources believed reliable, neither the information nor the forecast shall be taken as a representa- tion for which The Bank of Nova Scotia or Scotia Capital Inc.

• r any of their employees incur any responsibility.

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