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July 16, 2015 - Weekly Pricing Pulse
Commodity prices fell again last week, dropping another 4.7% to their lowest level for the year. The biggest contractions came from ferrous metals (iron ore was down 10.0%), chemicals (down 5.2%), and oil (down 4.7%). Pulp, freight, and lumber recorded small upticks--all less than 1%.
While a lot of chatter focused on Greece, more fundamental worries came out of China given the large stock market decline there. Although interventionist measures eventually stemmed the rout, the government's panicked reaction is creating apprehensions about China's reluctance to allow necessary market adjustments.
This Monday brought encouraging news of a provisional agreement on Greece's latest request for debt relief. Much uncertainty remains, but the lower risk of an immediate Greek Eurozone exit will boost equity markets and possible exchange-traded commodities. Additionally, Chinese equity market volatility will focus minds on whether the government's heavy actions will prove to be sufficient in calming markets. For commodity markets, however, the major focus this week may well be Iran, which is finalizing a nuclear deal with the P5+1 countries (China, France, Russia, the United Kingdom, the United States, and Germany) that will likely end sanctions and boost the country's oil exports. West Texas Intermediate in particular may test $50/barrel.