Weekly Pricing Pulse: Commodity Markets Flat in Face of US Court Ruling

Markets rallied last week after the US Court of International Trade ruled that President Donald Trump did not have the authority under the International Emergency Economic Powers Act (IEEPA) to apply “Worldwide, Retaliatory, or Trafficking Tariff Orders.”

Even though the appeals court granted a temporary stay against the ruling, it was viewed by traders as further evidence that trade tensions will continue to ease and boosted risk appetite. The S&P 500 stock price index ended up 1.6% on the week, 3.7% below the all-time high reached on Feb. 19.

Ultimately, commodity market sentiments remain mixed with easing trade tensions offset by persistent weak global demand. Next week’s release of May employment figures for the United States will give an indication of how trade tensions are impacting the real economy.

The Material Price Index (MPI) by S&P Global Market Intelligence was all but flat last week, falling by 0.2%. The marginal decline was mixed with six of the ten subcomponents falling. The MPI is approximately 13.2% lower than it was the same week a year ago, indicating a general easing in commodity prices over the past 12 months.

Chemicals were the major downward mover last week with the sub-index declining 0.9%, following an identical decrease the previous week. European spot propylene prices fell to a weekly average of €793/metric ton, down from €802/metric ton the week before. Asian spot prices showed similar weakness, falling to an average of $783/metric ton from $799/metric ton. 

In Europe, weak demand is the principal driver of declining prices with spot discounts of around 25% being offered to buyers. In Asia, outages at downstream polypropylene plants across the region caused a supply glut of propylene and created downward pressure.   

Energy prices had a strong week, with the sub-index increasing 1.2% following a broad rally in global natural gas markets. Spot prices for European natural gas reached $11.20/MMBtu, up from an average of $10.54/MMBtu the week before. European storage levels stand at 47%, and there is a need for a strong inventory build ahead of next winter. This, combined, with the start of peak seasonal demand, drove prices higher last week.  

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.