Weekly Pricing Pulse: Commodity Prices See Third Consecutive Weekly Fall

Markets were steady last week as the Fed held interest rates unchanged, in line with expectations, and flagged rising risks to both inflation and employment from newly announced tariffs.

A partial trade deal with the UK preserved the 10% universal tariff but eased Section 232 duties on steel, aluminum, and autos in exchange for UK tariff cuts on US goods, offering little inflation relief given the UK’s small trade share.

Economic data was negative, showing a wider trade deficit, a dip in productivity, and higher unit labor costs, leading us to trim our Q2 GDP forecast. Meanwhile, the Bank of England met last week and lowered interest rates to 4.25% from 4.5%, citing heightened global trade tensions as a key driver for reduced borrowing costs. Next week’s US data regarding CPI/PPI, industrial production, and housing starts will further inform how tariffs are filtering through prices and demand for commodities.

The Material Price Index (MPI) by S&P Global Market Intelligence declined by 0.9% last week, following a 1.7% decline the week before, a third consecutive weekly fall. The decline was mixed, with half of the ten subcomponents falling. The MPI is approximately 13.5% lower than it was the same week a year ago, indicating a general easing in commodity prices over the past 12 months.

Ferrous metal markets were a key downward mover for the aggregate MPI, with the sub-index falling by 1.8% last week. Weekly average iron ore spot prices fell by 1.7% to $98.4 / metric ton from $99.5 / metric ton the previous week, the lowest level since the start of the year. The drop was driven by confirmation from the China Iron and Steel Association that output curbs are actively underway to restore mill profitability. This weighed on sentiment and dampened expectations for iron ore demand.

In contrast, rubber prices showed strength last week, with the sub-index increasing 1.7%. Natural rubber prices on the Singapore Exchange rose to 214.9 cents per kilogram from 211.2 cents per kilogram the previous week, supported by renewed speculative buying. Optimism over US-China tariff negotiations helped lift sentiment, while the wave of monetary easing in mainland China — including a 10-basis point rate cut, a 0.5 percentage point reduction in the Reserve Requirement Ratio, and lower mortgage rates — boosted expectations for domestic demand and added upward pressure on prices.

— By Philip Azar

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.