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July 30, 2015 - Weekly Pricing Pulse
Last week proved to be another bearish one for commodities, with the IHS MPI down by 0.5%, taking us to post-2009 lows. Driving last week's decline was a 2.9% drop in oil, followed by a near-3.0% decrease in nonferrous metals and a 2.3% fall in lumber. There was a robust 8% increase in freight rates, although this is likely a further indicator of the global commodity glut. Rubber, pulp, and steel prices held fairly steady.
The driving factor behind most of these movements remains China--which started off this week with a fairly dramatic 8% decline in the Shanghai Composite. The correction in Chinese equities followed a poor MPI flash estimate for July, which was released the previous Friday and showed the country's manufacturing sector at its lowest level in 15 months.
Looking ahead, there is the prospect of more commodity weakness. Chinese growth, especially in heavy industry, looks increasingly soft. Additionally, US drilling activity has begun to tick upwards, pointing to the possibility that US tight oil production growth may adjust more gradually than previously expected.