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Our Materials Price Index (MPI) fell 2.1% last week, marking two
consecutive weeks of deterioration after three weeks of strong
increases. Prices declined broadly with eight of the ten MPI
sub-components dropping.
Lumber, freight, and nonferrous metals prices led the retreat
last week. United States lumber futures fell 9.8% last week, the
subcomponent's largest decline since the beginning of August.
Markets reacted to news that US September single-family building
permits and overall housing starts slipped 1% m/m and 1.6% m/m,
respectively. The freight rate sub-component fell 6.8% last week.
The shipping sub-component is a four-week moving average of rates
of ships carrying ores from Australia and Brazil to mainland China.
Sluggish demand has been putting downward pressure on rates since
the first week of October due to the continued impact of production
restrictions in mainland China. Pulp prices fell 4.2% last week for
the same reason. Nonferrous metals prices fell 5% last week in
anticipation of the modification of the Section 232 tariffs between
the US and EU. Aluminum prices saw the strongest declines, dropping
9.8%. With the recently announced suspension of the tariffs, steel
and aluminum prices will likely see some decline in November.
After recording two weeks of decline, the MPI is now 9.7% below its
May peak. While the energy sub-component fell 3.3% last week, price
levels remain elevated and supportive of the MPI across the fourth
quarter. Continue to watch lumber prices. While the worst may be
over for North American lumber prices, markets are likely in store
for continued volatility as the number of homes under construction
in September are at their highest total since January 1974.
Posted 03 November 2021 by Tal Dickstein, Senior Economist, Pricing and Purchasing
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May 23
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