Good incoming data and positive sentiment propel across-the-board gains in commodity prices

December 2, 2016 - Weekly Pricing Pulse

Across-the-board gains push the Materials Price Index to its largest weekly increase since February.

Building on gains from early November, the IHS Materials Price Index (MPI) jumped 3.0% this past week, its largest weekly increase since February. Key drivers to last week’s surge were freight and rubber prices, which jumped 7.2% and 6.8%, respectively.

In a very bullish sign, all of the underlying components of the index increased last week. Trading volume was also heavy. Oil rose strongly on increasing hope that OPEC will reach a production agreement, with the meeting in Vienna this week being closely watched. Nonferrous metals also pressed higher, up 3.0%, as copper prices hit a 17-month high with bullish expectations for manufacturing, notwithstanding a stronger dollar. The largest mover last week, however, was freight, which jumped because of increased demand from bulk commodities such as iron ore and coal.

Last week saw several positive macroeconomic announcements, part of the reason for the across-the-board gains. US durable goods orders jumped 4.8% in October, largely driven by increased aircraft orders. In the Eurozone, the Markit composite flash PMI climbed again, from 53.7 in October to 54.1 in November, its strongest reading of the year. In the United States, the Markit manufacturing flash PMI climbed to 53.9 in November, from 53.4 in October. Commodity markets are carrying a good deal of momentum into December, and may therefore push higher over the next week or two. This said, prices are beginning to look exposed, given the appreciation in the US dollar over the past month. Dollar strength with a looming US interest rate hike would seem to make commodity markets ripe for year-end profit-taking.

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IHS Materials Price Index

Industrial Materials: Prices

Industrial Materials: Prices

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