Declining demand in many markets has impacted commodity manufacturers. The IHS Markit Material Price Index (MPI) has seen a modest decline relative to the end of 2022, down roughly 6% from January 31st.
This is primarily due to energy and shipping costs – both of which are down significantly from last summer. Energy costs have declined almost 40% thanks to a mild winter (which we expand on further in the “energy” section of this report), while shipping costs are down a little over 20% due to the cooling economy. Other commodities, however, have experienced price increases due to supply chain disruptions and increased demand from other sectors. Concrete manufacturing costs have spiraled due to sanctions limiting the availability of petrochemicals, while copper and aluminum prices have risen due to their use in the market for electric vehicles and renewable energy. The complete impact of the global economic recovery on commodity prices remains to be seen, but it is likely that prices will continue to fluctuate. Supply chain disruptions and a rapidly changing demand environment all pose risks. Fortunately, many of these risks can be planned for and understood by producers.
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