Commodity Price Watch: October 2026

What is the forecast for global manufacturing costs through 2027?

Geopolitical conflict and the likely Super El Niño contribute disruptions to markets that will keep manufacturing costs elevated in 2027. Previous upside risks, including an extended period of below-average shipping traffic out of the Gulf and El Niño developing into a "very strong" or "Super" El Niño, are now the base case.

As the war in the Middle East continues, we assume oil flows from the Gulf will stay below prewar levels through 2027 and 2028. Even when conditions cool off, it could take months or years to repair damage to aluminum smelters, petroleum facilities and refineries, meaning a longer tail of constrained supply. Meanwhile, trade barriers are proliferating, adding friction and cost to international trade. Steel is perhaps the loudest category affected, but critical minerals, energy and downstream goods including autos will be affected too.

The Materials Price Index (MPI) by S&P Global Market Intelligence will trend higher through the end of 2026 and retreat modestly in 2027 but remain far above 2025 levels. By the fourth quarter of 2027, the MPI will be down 4.4% year over year, but it increased 28% between the fourth quarter of 2025 and the fourth quarter of 2026.

Improved crude oil flows and refining output, recovering metals exports and soft demand should bring industrial materials prices modestly lower through 2027, although the floor has shifted higher. In our outlook, 2026 looks like a closer model for 2027 and 2028 than 2024 or 2025.

Why are commodity markets remaining under pressure?

The 2027 outlook is being driven less by broad economic growth and more by supply-side constraints, geopolitical disruption and concentrated demand from AI data centers, electrification and defense manufacturing.

The war in the Middle East remains the most significant near-term risk, supporting higher energy, freight, insurance and logistics costs across global supply chains. Climate-related disruptions, including the likely Super El Niño, add further upside pressure to inflation and transportation costs. El Niño conditions should weaken by spring or early summer 2027.

While manufacturing and construction demand remains constrained at an aggregate level, strong demand growth from a narrow set of end markets is increasing competition for key industrial inputs including copper, electrical equipment, electronics and skilled labor. Prices will remain elevated and lead times strained for this group of inputs critical to the data center build-out.

What is the outlook for energy prices?

Crude oil and refined products were revised higher in this month's forecast. The ongoing war in the Middle East will continue to boost oil prices through at least the end of the year.

We now have Brent crude oil prices averaging US$100/barrel in the fourth quarter of 2026 and then spending most of 2027 near US$90/b. Refined product price forecasts were also revised higher. Diesel prices will maintain far above-average premiums over crude oil well into 2027, although below the record peak reached in late 2026.

The oil price forecast has been revised slightly higher this month, with prices now forecast to average US$88/b through 2027. There is scope for further sporadic increases through 2027 as hostilities in the Middle East continue. We assume some improvement in traffic through the Strait of Hormuz through 2027, although this is a significantly more bearish view than our prior outlook.

How are chemicals and plastics markets responding?

Many of our chemicals and plastics price forecasts were revised higher in the October update to reflect higher oil and feedstock costs, elevated spot prices and continuing supply disruptions.

The largest upward adjustments were concentrated in Asia, where recent prices have risen considerably above previous fourth-quarter assumptions.

What is the outlook for steel markets?

An increasing trend toward rising trade barriers leaves the global steel market significantly more fragmented than in recent years.

High fuel prices and shipping disruptions have slowed the process of US buyers shifting to imports for flat steel products. We have revised the forecast higher for steel sheet and plate in the US as a result.

What is the outlook for copper, aluminum and other nonferrous metals?

The outlook for nonferrous metals was little changed this month. On balance, risk remains skewed to the upside for nonferrous metals, particularly copper, where resilient demand has exacerbated a tightening of availability due to mine supply disruptions.

Aluminum is still expected to ease into 2027 as supply gradually recovers and demand softens, although prices will remain elevated compared with historical norms, particularly in the US because of increased tariff uncertainty.

How is AI infrastructure affecting commodity demand?

The data center build-out to support AI model research and products will continue at a strong pace into 2027 and 2028.

We expect supply constraints and public or political pushback to hamstring the pace of new data center additions, but not enough to flatten construction activity. This will remain the strongest growth engine for end use of industrial inputs including energy, labor, metals, building materials and equipment.

As a result, demand from AI, electrification and defense manufacturing is creating intense competition for key inputs even as broader manufacturing activity remains subdued. Prices and lead times for materials tied to data center construction are therefore expected to remain elevated through 2027.

• Manufacturing costs are expected to remain elevated through 2027 as supply disruptions, geopolitical conflict and trade barriers offset weaker aggregate demand.
• The Materials Price Index is forecast to decline modestly in 2027 but remain well above 2025 levels.
• Oil, chemicals, plastics and steel forecasts were revised higher in the October update. 
• Copper remains exposed to upside price risk, while aluminum prices should ease gradually but stay elevated by historical standards. 
• AI-related data center investment continues to be the strongers source of demand growth across energy, labor, metals, equipment and construction materials.

—With contributions from Emiliano Pérez