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Our Materials Price Index (MPI) fell 2.7% last week, with eight
of the index's 10 subcomponents posting declines. The slowdown in
mainland Chinese growth tied to widening COVID lockdowns has
weighed on sentiment in multiple commodity markets in recent weeks.
The 2.7% decline offset the 2% increase in the previous week, but
commodity prices generally remain elevated, with the MPI currently
sitting 10% above its 26-week moving average.
Lumber prices were the biggest mover last week with a 6.2%
increase building off the previous week's 10.5% climb. Prices have
gotten support in the last two weeks from logistics issues moving
lumber out of Canada and buyers replenishing inventories. Prices
below $900 looked attractive in an environment where prices were as
high as $1400 in March. Nonferrous metals and energy products saw
the largest declines in the index last week. The nonferrous metals
index retreated 4.7% with all six base metals in red. Aluminum saw
the biggest drop at 5.7%. Base metals prices were impacted by the
slowdown in mainland Chinese growth, flat or falling orders from
car makers, higher interest rates and a stronger US dollar. The
MPI's energy subcomponent posted a 4.4% decline, with nearly flat
natural gas prices, a 3.8% decline in oil, and coal sliding 7.3%.
The coal index was driven lower by US and European prices, which
both shed more than 10% last week as the near-term outlook on
European supply improved.
Last week we had mentioned that widening COVID-19 lockdowns in
mainland China were now drawing attention in markets. Indeed
sentiment worsened last week on news that other large cities in
China may soon face lockdowns similar to what is now happening in
Shanghai. This week sees the US Federal Reserve Open Market
Committee meet with markets widely expecting both a 50-basis point
interest rate hike and an announcement that the central bank will
also begin to shrink its balance sheet, moves that will reduce
liquidity and potentially add volatility to commodity markets.
Posted 05 May 2022 by Thomas McCartin, Senior Economist, Pricing & Purchasing, IHS Markit
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
