Commodity price index slumps

Scotiabank’s Commodity Price Index slumped by 0.1% month over month in August.

But the bank’s All Items Index has edged up so far this year by 1.2%, largely reflecting a 0.4% month-over-month rebound in its Oil & Gas Index over December 2012 levels. That’s because there’s been a strong cyclical recovery in building material prices.

“Slight gains in Alberta light and heavy crude oil, and a big increase in propane prices at both Edmonton and Sarnia offset softer natural gas export prices,” says Patricia Mohr, Scotiabank’s vice president of economics and commodity market specialist.

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The current “price level is closer to the true, inherent value of heavy crude oil in international markets,” she adds, “compared with the heavily discounted prices” seen in Q1 2013.

Highlights in the report include:

Agricultural prices have lost ground, as record U.S. corn crop and record world wheat crop push down prices.
Base metal prices have rallied, and spot iron ore and coking coal prices have moved higher as Chinese steel mills restock ahead of the fall construction season.
China’s steel production now represents 50% of the world total.
Stepped-up rail shipments of heavy crude will offset further delays to Keystone XL.
Gold prices strengthened this past August; they climbed to US$1,347 per ounce, alongside strong physical demand in traditional buying countries such as China and Hong Kong. Prices remain vulnerable to Fed tapering, but analysts say they bottomed in late June at US$1,180.

Read the full report.

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