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All monitored commodities saw solid price gains during July as
global demand strengthened and supply chains began to recover from
coronavirus disease 2019 (COVID-19) related restrictions. That
said, most prices remained below pre-COVID levels, with copper and
iron ore the notable exceptions. Transport costs meanwhile soared
amid further travel delays and a partial rebound in global trade
volumes.
The latest Price & Supply Monitor - a monthly report
designed to track global commodity price pressures and supply
shortages - saw all 12 monitored commodity indices rise in price
since June.
The IHS Markit Price & Supply Monitor is derived from IHS
Markit Pricing & Purchasing data and the Purchasing Managers'
Index™ (PMI) business surveys. PMI survey respondents are invited
to itemise specific goods where supply shortages have developed.
This information is transformed into indicators which show the
development of supply pressures relative to long-run trends.
Transport costs saw by far the largest price gain of 50% as
shipment demand improved and some travel restrictions remained in
place. Copper saw the next-largest increase, up 11% due to stronger
demand and mine stoppages. Polypropylene followed with a 9% gain.
While polyethylene saw the smallest uptick of the 12 indices, it
still climbed 4% from June to the highest in five months.
Supply shortages remained low across most of the monitored
commodities, with chemicals again the exception. That said, reports
from global panellists of chemical shortages fell back from May's
record high.
Copper leads gains in metal prices
Metal prices continued their upward trajectory at the start of
the second half of the year. All four monitored metals rose in
price, led by copper which increased nearly 11% to the highest
monthly average since April 2019. The mark-up was reportedly due to
mine stoppages in South America, rising global demand and reduced
inventories. However, reports from panellists of supply shortages
were lower than in June.
Zinc was the second-biggest mover in July, rising 8% to a
six-month high. Aluminium rounded off the non-ferrous grouping with
a 5% price increase. Nevertheless, both metals remained below their
24-month averages.
Iron ore prices rose for the third month running in July, up 5%
to $107/DMTU, the highest seen for a year. The increase was partly
linked to greater Chinese stimulus in the construction sector.
Meanwhile, concerns of supply shortages weakened since June.
Energy prices rise, but remain historically
low
The IHS Markit Energy Prices Index climbed a further 6% in July
to recover more ground lost during the COVID-19 pandemic. The index
was at its highest in four months, but remained well down on the
level seen at the start of 2020.
Oil and gas both recorded solid gains at the start of the third
quarter. Gas prices rose 8% to erase the losses from June, while
oil climbed 7% to $43/barrel, its highest price since February.
These upticks were largely attributed to rising global demand and
increased vehicle mobility. Panellists noted that availability of
both commodities remained strong.
Meanwhile, a return to more normal activity and an increase in
bulk shipping demand led to a marked rise in transport costs in
July. The index rose 50% to the highest for seven months, and was
above its two-year average.
Chemicals up 6% as shortages ease
Chemical prices continued to recover in July from their collapse
earlier this year. The IHS Markit Chemical Prices Index rose 6%
during the month, leading to an overall 51% increase from April's
18-year low. The latest mark-up was largely due to a rebound in
global demand following the economic impact of the COVID-19
pandemic.
All three monitored commodities rose for the third successive
month, led by polypropylene which increased by 9%. Rubber prices
climbed 6%, while polyethylene saw the smallest uptick of just 4%.
Only rubber was in line with its 24-month average; both
polypropylene and polyethylene prices remained relatively weak.
At the same time, panel mentions of chemical shortages continued
to decrease in July, having reached a record high in May. That
said, supply concerns were still relatively strong as some
countries kept lockdown restrictions in place.
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
