Weekly Pricing Pulse: Chemical Prices Lead the MPI Downward

• The Material Price Index (MPI) by S&P Global Market Intelligence fell by 0.5% last week, continuing the relatively muted movements over the past month.
• The decrease was broad; seven of the ten subcomponents fell.
• Chemical prices were the most significant downward mover last week, as the subindex fell 1.3% last week. 
• This week, markets expressed mixed feelings following Federal Open Market Committee (FOMC) chair Jay Powell's speech at Jackson Hole, which opened the door to a potential policy rate cut in September.

Federal Open Market Committee (FOMC) chair Jay Powell made a speech at Jackson Hole which opened the door to a policy rate cut in September. Powell noted that inflationary pressures, notably from tariffs, persist, but also that pressures on the job market may warrant a rate cut. S&P Global Market Intelligence believes a rate cut in September is more likely than not, but it is far from certain.

US President Donald Trump threatened to fire Federal Reserve governor Lisa Cook last week – and has since said he has done so – in an escalation of tensions between the White House and the FOMC.

Details on an EU-US trade deal were released which included a minimum tariff of 15% as well as EU purchasing and investing commitments. While the nature of the coming trade landscape is crystalizing, the effects of it remain unclear, increasing risks for commodity prices in the coming months.

The Material Price Index (MPI) by S&P Global Market Intelligence fell by 0.5% last week, continuing the relatively muted movements over the past month. The decrease was broad; seven of the ten subcomponents fell. The MPI is approximately 6.0% lower than it was the same week a year ago, indicating a general easing in commodity prices over the past twelve months.

Chemical prices were the most significant downward mover last week, as the subindex fell 1.3% last week. Ethylene was notably weak, with average weekly spot prices on the United States Gulf Coast declining to 27.3 cents/pound, down from 32.7 cents/pound at the start of August. Partially this comes as a lagged response to falling oil prices.

Oil prices have declined 7% in the last month where chemical prices, which track close to oil, have only declined by 3%. Markets remain well supplied and demand is weak, leaving prices vulnerable to the falling feedstock costs.

Nonferrous metals prices were another source of downward price pressure, as the sub-index declined 1% last week. This is in response to market nerves in the wake of the enactment of tariffs over the past weeks which has reduced demand for industrial metals. Zinc saw the strongest decline, falling 1.9% to a weekly average of $2768/mt last week.

--Gregory Muller

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.