Commodity price increases lack conviction – IHS
Commodity analysts IHS Markit on Thursday reported that the Materials Price Index (MPI) had risen by 0.5% in the last week, but that the index’s ten subcomponents were evenly split between those showing increases and those showing declines, highlighting the uncertainty in markets.
The MPI measures a weighted average of weekly spot prices for a key collection of globally traded manufacturing inputs, such as crude oil, chemicals, nonferrous metals, ferrous metals, paper pulp, lumber and rubber, besides others.
“The ferrous price index rose 2.1% week-on-week despite a softening of US scrap prices, underscoring the strength of the recent iron-ore rally,” the organisation noted.
Rising steel prices in China are running counter to copper and other base metals pricing. IHS believes the higher steel prices reflect forced consolidation in the Chinese industry and the expected effects of stimulus in China on shipments later this year.
Oil prices have been declining since late May. “Last week, oil prices fell 1.1% with West Texas Intermediate (WTI) reaching $66.5/bbl, down from $74/bbl a month before.” This was as a result of US crude inventory data falling by less than expected.
“US dollar strength has been a headwind for commodity markets since the start of the second quarter, with last week’s intensifying financial crisis in Turkey providing a fresh challenge,” IHS commented.
The organisation said the collapse in the Turkish lira will probably create disruption in the region’s commodity market dynamics, especially in steel.
IHS concluded that two more US interest rates hikes this year will push long bond rates higher, provide support to the dollar and keep commodity markets volatile.
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