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Transport costs rise sharply amid container shortages
Chemical prices increase, but at softer rate
The latest Price & Supply Monitor - a monthly report
designed to track global commodity price pressures and supply
shortages - saw higher prices across most of the major commodities
in January. Inflation was mainly linked to a build-up of global
supply chain issues due to the coronavirus disease 2019 (COVID-19)
pandemic, including widespread input shortages and a lack of global
freight containers
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.
Across the monitored commodities, iron ore saw the sharpest
uptick in price during January, followed by a strong rise in crude
oil. Prices of chemical goods also rose, but at a far softer rate
than seen at the end of 2020. Meanwhile, transport costs increased
by over 19%, as global freight companies faced a dearth of
container supply due to COVID-19 restrictions and rising export
demand.
Iron ore prices soar to 112-month high as metal supply
weakens
Metal prices remained elevated at the start of 2021, with iron
ore and copper seeing further mark-ups as surveyed businesses
reported a weakening in global supply. Iron ore registered the
strongest uptick in price, rising 11% to its highest level since
September 2011. At the same time, reports of supply shortages were
the most frequent since mid-2008.
Copper also experienced both increasing supply pressures and a
rise in price in January. The metal saw a more modest price
increase of approximately 3%, but nevertheless reached its highest
monthly average price for almost eight years. Aluminium and zinc,
meanwhile, both recorded slight reductions in price after posting
recent highs in December. Notably, zinc was the only monitored
metal to not see a steep increase in supply pressures.
Transport costs rise sharply amid container
shortages
Global energy markets saw further price inflation in January, as
signalled by the IHS Markit Energy Prices Index which rose 11%
since the end of last year. Crude oil contributed to the uptick
with a 9% increase to $55/barrel, nearing the level seen in
February 2020 before most major economies entered strict
lockdowns.
Higher oil prices came at the same time as a sharp rise in
freight costs in January. Sea freight companies reportedly
struggled with low container supply as a result of disruption to
shipping schedules from the COVID-19 pandemic. Consequently,
transport costs climbed 19% over the month to the highest since
last October.
Chemical prices increase, but at softer
rate
Chemical prices were also influenced by supply pressures in
January, with the number of firms reporting supply shortages of the
commodity grouping rising to one of the highest levels on record.
As a result, the IHS Markit Chemical Prices Index was up nearly 4%
to its highest since October 2018. Moreover, the index has risen by
35% over the last two months, after a marked rise during
December.
All three of the monitored chemical commodities saw upticks in
price, led by polyethylene which increased by 5% to $2.25/pound. It
was closely followed by polypropylene which recorded a 3% monthly
increase. That said, these compared with rises of 39% and 18% in
December respectively. Rubber prices edged up only fractionally in
January, but nonetheless marked its highest price for nearly four
years. Notably, mentions of weak rubber availability were the most
frequent since July 2017.
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.
