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Weekly Pricing Pulse: Commodity costs proceed to retreat


May 12, 2022
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Our Supplies Worth Index (MPI) decreased 1.4% final week, with
half of the index’s ten sub-components falling. Markets have been
rising more and more nervous about development prospects with widening
Chinese language COVID-19 lockdowns and better rates of interest in latest
weeks. This sparked the second consecutive weekly decline in
commodity costs with costs now collectively 10.4% decrease than the
all-time excessive established in early March.

Declining industrial steel costs have been the primary purpose for the
drop within the MPI final week. The nonferrous steel index was down 5%,
with 5 of six of the tracked base metals falling (tin proved to
be the exception). Aluminum costs have been down 6% for the week and
dipped beneath $3,000/metric ton for the primary time since January.
Copper costs fell to the bottom level in 2022 ending the week
at $9,427/metric ton having been as excessive as $10,730 in early March.
Metals markets have been reacting to a wide range of elements together with
weaker demand alerts from mainland China, rising US rates of interest
and the energy of the US greenback. The US greenback rose sharply final
week making greenback denominated metals dearer for patrons
utilizing different currencies. The metal making uncooked supplies index
declined 3.8% as the value of iron ore ended the week at
$136/metric ton. Iron ore merchants have been significantly gloomy after
the Politburo assembly in mainland China confirmed the dedication to
utilizing lockdowns to manage COVID-19. The anticipated unfavorable influence
on financial development weighed closely on the iron ore worth.

Declining industrial metal prices were the main reason for the drop in the MPI last week.

One other spherical of commodity worth declines added to bearish
sentiment throughout markets final week. As anticipated, the US Federal
Open Market Committee (FOMC) raised the goal for the federal
funds charge by 50 foundation factors to a spread of 0.75-1.00%. The Financial institution of
England Financial Coverage Committee additionally introduced an rate of interest
enhance of 25 foundation factors to 1.0% whereas forecasting that the UK
financial system would enter recession later this yr. Lastly, the Central
Financial institution of Brazil raised its coverage charge from 11.75% to 12.75%, a full
share level. This information, coupled with the Might Day vacation,
dampened shopping for final week and led to declines in world commodity
and fairness markets. With shopper inflation remaining excessive throughout
the globe, additional rate of interest hikes are anticipated, which is able to to
put additional downward stress on commodity costs.

Another round of commodity price declines added to bearish sentiment across markets last week.

Posted 12 Might 2022 by Michael Dall, Affiliate Director, Pricing and Buying, IHS Markit

This text was revealed by S&P International Market Intelligence and never by S&P International Scores, which is a individually managed division of S&P International.

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