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The overall MPI remains highly correlated with oil price changes, a continuation of a three-month trend

July 20, 2017 - Weekly Pricing Pulse

The IHS Materials Price Index (MPI) fell last week, slipping 0.7%, its first decline since the middle of June. Weakness in oil, down 1.5%, and chemicals, down 3.9%, pulled the overall MPI lower. Lumber and pulp prices were rare bright spots for sellers, up 7.1% and 2.1%, respectively.

Oil price changes have been a key driver of the MPI over the last few months, with gains and losses in the headline index reflecting the direction of oil markets every month back to April. Lumber prices climbed spectacularly last week as wildfires in Canada forced some sawmills to halt operations at a time when prices were already being pressured higher by softwood duties on exports to the United States. Our chemical index also slipped 3.9% last week, as US ethylene prices continued to drop—hitting their lowest levels since February 2016, as the US ethylene market remains oversupplied.

Last week saw several positive macroeconomic readings, so despite the fall in our headline commodity index, we do not think the market has necessarily turned negative. In the United States, the June industrial production measure gained 0.4%, following a flat reading the prior month, with mining the big driver of gains, up 1.6%. In the Eurozone, the same measure was up 1.3% for May, a third consecutive monthly gain; capital goods were the force behind the impressive headline figure. However, most eyes were on the upcoming Chinese GDP release, with the coming week's price moves likely to have been heavily influenced by the outcome here.

IHS Materials Price Index

IHS Materials Price Index

Industrial Materials: Prices

Industrial Materials: Prices

Key Prices & Demand Drivers

Key Prices

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