VANCOUVER (miningweekly.com) – The materials price index (MPI) from Global Insight by IHS Markit gained 1.6% last week, its strongest increase since late August, breaking a two-week streak of losses, the research firm revealed on Friday.
According to IHS Markit economist Cole Hassay, the expansion was broad-based, with seven of ten subindices increasing. Oil and chemical prices posted strong gains, increasing by 2.3% and 2.2%, respectively, while DRAM prices rose 4.2%.
"Data releases were supportive of oil prices last week; the Baker-Hughes rig count fell for the third consecutive time with crude oil inventories also falling. Additionally, tensions in northern Iraq between government and Kurdish forces created unease in markets, putting upward pressure on prices," Hassay said.
Further, higher oil prices moved to downstream products, particularly chemicals. According to Hassay, the recent strength in oil prices will not persist, since markets are overheated and prices will retreat as production increases. "As for DRAM markets, supply constraints are continuing to push up prices, a trend we have seen persist over the past three weeks," the economist advised.
Meanwhile, with the exception of China, data releases last week did not reflect the strength in the Multidimensional Poverty Index.
In the US, the manufacturing component of the industrial production report was disappointing, increasing only 0.1% month-over-month. In the Eurozone, the Harmonized Index of Consumer Prices increased 0.4% month-over-month, coming in as expected.
Alternatively, in China, the surprising strength seen this year persisted, seeing the gross domestic product for the third quarter growing 6.8% year-on-year, only 0.1% lower than in the second quarter. Chinese industrial value-added output grew 6.6% year-on-year in September, faster than in August, but still below the rates of growth recorded in the first and second quarter, Hassay noted.
"Though the latest data from China looks promising, and has excited commodity markets, we do not expect this strength to continue. Slower growth in China, combined with our outlook for oil prices and tighter financial markets, is expected to produce a change in commodity markets; upside risk will be limited for prices in the near term," Hassay noted.