Home Commodities Weekly Pricing Pulse: Commodity prices edge up reversing last week’s declines

Weekly Pricing Pulse: Commodity prices edge up reversing last week’s declines

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Our Materials Price Index (MPI) rose 1.4% last week, reversing
the declines recorded during the previous week. Exactly half of the
ten subcomponents in the MPI increased: evidence of the uncertainty
permeating markets at present. That said, the general direction of
commodity prices has been down over the past two months with the
index now 12.3% lower than its all-time high established in early
March.

MPI Materials Price Index shows increase in commodity prices

A flurry of activity in oil markets was the catalyst for
commodity price rises last week. The EU announced the details of
its Russian embargo on crude oil products causing a surge in prices
at the start of the week. The ban included all seaborne crude oil
products from Russia, around 75% of the total imports into the EU.
This caused Brent Crude, the international benchmark, to reach
$125/barrel, its highest in two months. However, OPEC+ then
announced its plans to accelerate production increases in July and
August from 400,000 barrels a day to 650,00 barrels a day. This
supply boost brought prices back down to $115/barrel. Even so, oil
prices still finished the week 2% higher and have now increased for
three consecutive weeks. Elsewhere, supply concerns in metal
markets continue to provide upward pressure on prices. The price of
zinc rose to $3,977 per tonne from a low of $3,743 per tonne in the
prior week of trading after weak first quarter production figures
from the industry. Glencore, the world’s largest zinc producer,
announced its production in the first quarter was almost 15% lower
than the same period in 2021. Zinc producers are wrestling with
higher energy costs with much of European refining capacity being
taken off-line.

Changes in ferrous and chemical prices MPI

Equity markets slid last week and have now fallen in eight of
the last nine weeks as investors remain wary of high inflation and
monetary tightening. Tight labor markets in the US remain a source
of concern and the latest data showed nonfarm payroll employment
rose 390,000 in May, a bit above the IHS Markit estimate and the
consensus expectation. Even though the data release reported
payroll gains slowing in the US, equities still declined on the
expectation that the Federal Reserve will pursue aggressive
monetary tightening. Inflation is unacceptably high, unemployment
unsustainably low, and inflation expectations have crept above the
Fed’s long-run 2% objective. Markets do not have long to wait for
fresh information on inflation or policy direction — the US May
CPI report will be released this Friday followed by the US Fed and
European Central Bank meetings next week. IHS Markit believes the
data will soon show a definitive peak in inflation, though its
retreat over the next year may prove to be painfully slow. The
looming threat, however, is in energy markets where growing
physical tightness over the next six months may trigger record oil
prices by year-end.

MPI commodity price contribution and movement this week




Posted 09 June 2022 by Michael Dall, Associate Director, Pricing and Purchasing, S&P Global Market Intelligence


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.

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