January 26, 2018 - Weekly Pricing Pulse
The MPI sees its third weekly increase of over 1.0%.
The IHS Markit Materials Price Index (MPI) increased for the 11th consecutive time last week, rising 1.8%. The MPI is up 16.9% since the current rally began back in October, with prices as measured in the index now back to levels last seen in late 2014. Chemicals prices led the rise, increasing 5.2%, while both lumber and the DRAMS index moved up 3.3%.
Supply concerns pushed up prices across the commodity complex last week. Propylene prices rose sharply as all three dehydrogenation plants in the United States experienced trouble, while freezing temperatures in the Gulf Coast disrupted supply in ethylene markets. In lumber markets, fallout from wildfires in Western Canada continued to put upward pressure on prices. Meanwhile, in DRAMs markets, prices for an older 8GB module chip increased 12.3% due to a spot shortage; this price increase should dissipate over the next couple of weeks.
Data releases reinforced the buoyant mood in commodity markets. In the United States, December industrial production narrowly beat market expectations, coming in at 0.9% month on month (m/m). US consumer sentiment also remains strong, highlighted by the Bloomberg Consumer Comfort Index, which hit a 17-year high of 53.8 last week. In China, the data once again surprised to the upside, with fourth-quarter GDP growing 6.8% year on year (y/y) and industrial production increasing 6.2% y/y in December. Although temporary supply disruptions helped drive prices higher last week, there is no denying the current strength in commodity markets. Conditions have improved since this time last year to be sure, but in many markets prices seem to have run a bit ahead of fundamentals, leading to questions about whether they can be fully sustained.
IHS Markit Materials Price Index
Industrial Materials: Prices
Key Prices & Demand Drivers
