Commodities level off in May

TORONTO—Scotiabank’s Commodity Price Index surged in April, up 6.1 per cent month over month (m/m) to a level just 13.4 per cent below the July-2008 record high.

The All Items Index also climbed 60.4 per cent from the cyclical low in April 2009.

But after 10 consecutive monthly gains, the All Items Index likely corrected sharply in May. Commodity prices should consolidate in coming months but are expected to rally in the fourth quarter.

“Jitters over a mild growth slowdown in China and concern over the impact of high food and energy prices on global consumer spending and growth had been percolating through commodity markets in the second half of April,” says Patricia Mohr, vice-president of Economics and Commodity Markets at Scotiabank.

Here’s some indexes and how they reacted:

Oil and Gas Index

The Oil & Gas Index led an advance in overall commodity prices in April (jumping 10.5 per cent m/m). The Edmonton par price (light oil) jumped more than US$16 per barrel to a level only 14.8 per cent below the all-time record high in July 2008.

Heavy oil prices at Hardisty, Alberta were also up more than US$10.  Natural gas export prices increased modestly as unusually heavy U.S. nuclear plant maintenance shutdowns pushed prices across North America up.

Metal and Mineral Index

The Metal & Mineral Index was also strong in April advancing 7.8 per cent m/m. After reaching US$330 per tonne in the April-to-June quarter, contract prices in Asia for Western Canada’s premium-grade hard coking coal will likely drop to about US$280 in the July-to-September quarter.

Steel output in China will likely fall back over the summer, potentially limited by power cutbacks.

Coking coal markets will be underpinned by China’s increasing reliance on seaborne imports to satisfy demand.  Spot potash prices for overseas sales climbed from US$409 per tonne in March to US$425 in April.