Glencore and Russia stop early-autumn MPI bleeding
October 15, 2015 - Weekly Pricing Pulse
Better sentiment helped buoy commodity prices last week, with the IHS Materials Price Index (MPI) recording a broad-based 0.8% gain. Oil was up a strong 7.1% on the back of Russia's Syrian intervention, US production cuts, and dollar weakness in light of the dovish FOMC meeting minutes. The US oil export ban was overturned by the House of Representatives, although the bill's final passage is far from certain, given a possible presidential veto.
Base metals rose 2.0% on news that Glencore plans to cut its zinc production by one-third. Glencore had earlier announced large cuts at its copper operations. Other gains for the week included lumber, up 4.2%, and freight, up 2.1%. Chemicals, however, did decline by almost 4%, although downstream support from higher oil prices could come through as early as next week.
Looking ahead, we expect a slight 0.4% decline in the MPI next week; early-week trends already show oil drifting lower. It bears reminding that expectations and sentiment change quickly. Indeed, we anticipate a good deal of volatility in the run-up to a US interest rate hike in December, with the MPI registering a low for its current cycle in the fourth quarter.
Industrial Materials: Prices - Week of 15 October 2015
Key Prices & Demand Drivers