By: The Working Forest Staff
Prices for products manufactured in Canada, as measured by the Industrial Product Price Index (IPPI), fell 0.4% in October, driven mainly by lower prices for lumber and other wood products. Prices of raw materials purchased by manufacturers operating in Canada, as measured by the Raw Materials Price Index (RMPI), increased 0.5%, mostly due to higher prices for animals and animal products and crop products.
Prices for industrial products decrease
Industrial Product Price Index
In October, the IPPI declined 0.4%. Of the 21 major product groups, 6 were down, 12 were up, and 3 were unchanged.
Lumber and other wood products fell 7.0%, mainly driven by lower prices for softwood lumber (-12.7%). This marked the first decrease observed in the softwood lumber category since April of this year. In spite of this market correction, the price of softwood lumber was 73.7% higher in October 2020 than in October 2019.
Primary non-ferrous metals decreased 2.1%, mostly due to lower prices for silver. Silver prices are influenced by industrial demand, as well as demand from investors. Economic uncertainty this year due to COVID-19 has contributed to volatility in the price of this precious metal. Although the price of silver fell in October, it remained at a high level; the London Bullion Market Association silver price closed for the month of October at $23.62 USD per ounce, compared with $18.05 at the end of October 2019.
Prices for meat, fish, and dairy products fell 1.1% in October. Within this group, lower prices were observed for fresh and frozen poultry (-6.3%), as well as fresh and frozen beef and veal (-2.4%). Conversely, prices for fresh and frozen pork (+2.3%), as well as processed meat products, other meats, and animal-by-products (+1.1%) increased. Strong global demand for pork, as well as strong exports, supported its price. September 2020 data showed that the year-to-date value of exports was up 24.2% compared with the same period the previous year.
The decline in the IPPI was tempered by some key product groups that showed increases. The fruits, vegetables, feed and other food products category rose 1.4%, mostly due to a sharp upturn in prices for grain and oilseed products, not elsewhere classified (+4.8%).
Prices for primary ferrous metal products increased by 1.7%, mostly due to higher prices for basic and semi-finished iron or steel products (+1.7%). This price movement was partly due to the effects of infrastructure stimulus in China, which increased demand for steel as well as iron ore. In October, the Caixin/Markit Purchasing Managers’ Index (PMI) for Chinese manufacturing came in at 53.6, its highest level since January 2011. PMI levels above 50 signal an expansion.
Prices for pulp and paper products (+1.8%) and energy and petroleum products (+0.6%) also increased in October. The former group rose mostly due to a 3.7% increase in the price of wood pulp. The increase observed in energy prices was primarily due to higher prices for diesel and biodiesel fuels (+7.3%). Diesel prices tend to increase in October due to increased seasonal demand for heating oil. Lower prices for motor gasoline (-2.6%) and asphalt (except natural) and asphalt products (-6.0%) moderated the increase. Demand remained weak for finished petroleum products in October. US Energy Information Administration data show that during the month, the weekly average of finished motor gasoline supplied was 10.7% lower year over year in the United States.
Year over year, the IPPI increased 0.7%, mostly due to higher prices for lumber and other wood products (+37.6%) and a 20.7% increase in prices for primary non-ferrous metals. The year-over-year gain was moderated by a 31.2% decrease in prices for energy and petroleum products.
Raw Materials Price Index
In October, the RMPI increased by 0.5%. Of the six major product groups, five were up and one was down.
Prices for animals and animal products increased 2.6%, mostly due to higher prices for hogs (+16.9%); strong global demand for pork is responsible for supporting these higher hog prices.
Crop product prices were up 3.1%, led by increases in prices for other crop products (+3.2%), canola (+3.4%) and wheat (+7.5%). Strong demand from China, as well as concerns about production and cold winter weather, played a part in these price increases.
Downward influence on the RMPI came from metal ores, concentrates and scraps (-2.3%), which includes the price of silver. As mentioned above with reference to the IPPI, the price of silver has been volatile but remained at a high level in October.
Year over year, the RMPI fell 0.3%. This decline was mostly driven by a 25.9% decrease in prices for crude energy products, which was moderated by a 28.4% increase in prices for metal ores, concentrates, and scrap.