In May 2024, industrial and raw material prices in Canada exhibited mixed trends, reflecting the intricate dynamics of global supply chains, demand fluctuations, and geopolitical influences.
The Industrial Product Price Index (IPPI)
The IPPI remained unchanged in May 2024 on a month-over-month basis, halting a sequence of four consecutive monthly increases. However, it showed a 1.8% rise when compared to the same month in the previous year. The stability in the monthly IPPI was a result of opposing movements within its sub-components.
Energy and Petroleum Products: The largest downward pressure came from energy and petroleum products, which fell by 3.9%. This decline was driven by significant drops in diesel fuel (-5.8%) and finished motor gasoline (-3.3%), primarily due to lower crude oil prices.
- Lumber and Wood Products: Prices for lumber and wood products decreased by 4.9%, led by a notable 10.2% decline in softwood lumber prices. This drop was attributed to reduced demand stemming from high mortgage rates in the United States, impacting new housing projects and subsequently, lumber demand.
- Non-Ferrous Metals: On the upside, prices for primary non-ferrous metal products rose by 4.3%. Unwrought silver and silver alloys saw a 6.9% increase, driven by strong industrial demand, particularly from the solar panel sector. Unwrought copper and nickel also saw substantial price hikes due to supply concerns and geopolitical factors affecting production in key regions.
- Meat, Fish, and Dairy Products: This category experienced a 1.6% increase, marking the third consecutive monthly rise. Fresh and frozen pork prices surged by 7.7%, and chicken prices increased by 6.6%, fueled by strong seasonal and export demand.
- The 1.8% year-over-year increase in the IPPI was the most significant since January 2023. Key contributors included unwrought silver (+23.1%), gold (+19.3%), and copper (+24.6%). Conversely, declines were observed in unwrought nickel (-10.5%) and canola oil (-13.4%).
Raw Materials Price Index (RMPI)
In contrast to the IPPI, the RMPI declined by 1.0% month-over-month in May 2024 but showed a robust 7.6% increase on a yearly basis. This disparity highlights the volatile nature of raw material markets.
- Crude Energy Products: A significant 6.4% drop in prices for crude energy products, particularly conventional crude oil (-7.0%), led the monthly decline. This followed a period of increased prices, influenced by easing geopolitical tensions and expected stable production levels from OPEC+.
- Metals and Ores: Excluding energy, the RMPI rose by 2.4%. Metal ores, concentrates, and scrap saw a 4.5% increase, with notable price rises in nickel ores (+7.4%) and zinc ores (+6.1%), driven by supply constraints and improved market conditions.
- Crop Products: The prices of crop products rose for the third consecutive month, up by 3.0%. Adverse weather conditions in key producing regions like Russia and Northern Europe contributed to higher wheat prices (+10.7%), while ongoing drought conditions in Canada further supported this upward trend.
- The RMPI’s 7.6% year-over-year increase was partly due to a base effect from significant price declines in May 2023. Conventional crude oil prices surged by 11.0%, while other substantial increases were observed in metal ores (+17.3%) and synthetic crude oil (+12.6%).
- On the downside, canola (-9.8%) and nickel ores (-9.9%) saw notable yearly price decreases due to ample supply over the past year.