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Economy in Brief

FIBER: Industrial Commodity Prices Decline as the Factory Sector Weakens
by Tom Moeller  April 13, 2020

• Commodity prices weaken broadly.

• Declines most pronounced in petroleum & oil products group.

The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) declined 9.9% during the last four weeks and 19.2% over the last year. The price index fell to the lowest level since June 2009.

Prices in the crude oil & benzene group declined by nearly one-quarter during the last four weeks as WTI crude oil prices weakened to $25.75 per barrel, down from a high of $61.92 in the first week of January. Prices of petro-chemical benzene fell by over one-half in the last four weeks (-53.9% y/y). Excluding crude oil, industrial commodity prices declined 9.2% during the last four weeks and were off 15.7% over the last year.

Prices in the miscellaneous group declined 9.8% over the last four weeks as framing lumber costs declined 22.3% over that period. Plywood prices held steady but were 11.2% lower over the last year. The price of natural rubber declined 12.0% during the last four weeks. Metals prices fell 9.8% in four weeks, reflecting a 13.8% decline in aluminum prices, while steel scrap prices fell 10.7% over four weeks. The cost of copper scrap fell 10.5%. Zinc prices fell 3.9% in four weeks (-36.3% y/y) and the cost of lead declined 8.5% in four weeks (-14.8% y/y). Textile prices weakened 2.4% in four weeks led by a 14.8% drop in the cost of cotton to nearly the lowest level since April 2006. This decline was countered by a 0.9% rise in the cost of burlap, which improved 1.1% y/y.

The U.S. factory sector has weakened with the onset of the coronavirus, pushing prices lower. Raw steel production fell 7.9% (SA, -20.4% y/y) early in April and lumber production fell throughout the month of March. During the last ten years, there has been a 66% correlation between the y/y change in industrial commodity prices and the y/y change in factory sector production.

Commodity price data can be found in Haver's DAILY, WEEKLY, USECON and CMDTY databases. The NABE forecast is in the SURVEYS database.

FIBER Industrial Materials Price Index (%) 1-Mth 3-Mth 6-Mth 12-Mth 2019 2018 2017
All Items -9.9 -15.3 -12.0 -19.2 1.1 -12.0 6.7
  Excluding Crude Oil -9.2 -11.6 -8.8 -15.7 -0.6 -11.1 4.9
 Textiles -2.4 -4.2 -1.8 -6.3 -1.6 -2.8 3.0
  Cotton (cents per pound) -14.8 -26.9 -18.6 -34.1 -6.6 -9.2 9.8
 Metals -9.8 -17.1 -13.4 -24.6 -4.3 -12.2 18.6
  Aluminum ($ per metric ton) -13.8 -19.1 -16.6 -22.5 -6.5 -12.7 26.0
  Copper Scrap (cents per pound) -10.5 -19.2 -12.4 -23.2 3.5 -16.1 29.3
  Steel Scrap ($ per ton) -10.7 -19.2 1.8 -22.3 -0.8 2.3 16.8
 Crude Oil & Benzene -21.4 -40.2 -35.9 -38.8 20.2 -20.0 8.1
  Crude Oil (WTI, $ per Barrel) -20.1 -58.4 -51.3 -59.7 35.5 -24.4 10.9
 Miscellaneous -9.8 -7.8 -5.1 -12.9 -0.0 -14.8 -0.5
  Framing Lumber ($ per 1000 board ft.) -22.3 -27.8 -21.9 -20.4 22.6 -23.1 20.0
  Natural Rubber (cents per pound) -12.0 -11.8 0.7 -16.6 10.7 -4.1 -29.6
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