During the month, the pace of improvement in manufacturing conditions slowed. The JP Morgan Global Manufacturing Purchasing Managers’ Index (PMI) for April declined to 52.8 from its readings of 53.0 cent a 69- month peak – in the previous two months. The deceleration in manufacturing prospects was mainly observed in China and the US. This translated into the weakening of metals prices. Furthermore, the declining momentum has coincided with diminishing expectations of a swift passage of growth enhancing reforms by the new US administration after the difficulties experienced moving forward healthcare reform in March. At the same time, with a slower-than-expected performance of the US economy in 1Q17 and the impact of geopolitical tensions, expectations for real interest rates declined, thereby supporting gold prices, while weakening the US dollar.
Agricultural commodities were generally weak for the second consecutive month, led by sharp drops in food prices, but especially in vegetable oils, due to continuing oversupply of oilseeds. The US Department of Agriculture made upward revisions to its forecast for world-ending stocks of wheat, corn, soybeans and rice for the current marketing year. Brazilian output expectations for corn and soybeans were revised up by the National Food Supply Company (Conab) of that country, and are expected to increase by around 38% and 15%, respectively, from the previous year. Wheat prices increased at the end of the month due to frost in the US central Great Plains. Sugar prices dropped sharply also due to lower expected import requirements from India and stable expected output in Brazil despite lower sugarcane output, as the industry takes advantage of favourable sugar prices and exchange rate.
Metals prices generally dropped on the perceived deceleration in the pace of expansion of manufacturing in China, where manufacturing PMI decreased to 50.3 in April versus 51.2 the previous month. Furthermore, previously present post-US election impulses have faded as scarce details about the potential infrastructure boost by the new US administration are now known. Meanwhile, copper prices were also weakened by receding fears of supply disruptions in the two largest copper mines in Chile and Indonesia, while strikes in Peruvian copper mines were ended during the month. Nickel prices dropped sharply on the anticipation that mine operations could restart in the mines closed by the environment ministry after a vote of no-confirmation in the country’s congress. Aluminium prices, on the contrary, increased as production is expected to decline in China due to government efforts to reduce pollution. Meanwhile, iron ore dropped sharply following a drop in steel prices. World steel output was reportedly up 5.7% y-o-y and up by 1.8% y-o-y in China in March, according to World Steel Association.
In the group of energy commodities, oil prices advanced mainly in the first half of the month on the prospect of extending the OPEC-non OPEC Declaration of Cooperation. Natural gas prices advanced on average in the US, but weakened in the middle of the month as milder temperatures at the beginning of spring were translating into higher-than-average increases in underground storage. Meanwhile in Europe, EU-28 inventories reported by Gas Infrastructure Europe increased slightly to 29.9% of capacity at the end of April vs. 29.4% the previous month. Australian thermal coal prices advanced due to shutdowns in the areas affected by cyclone Debbie in Australia.
Average energy prices in April increased by 2.7% m-o-m, due to a 2.5% increase in average crude oil prices, while natural gas prices in the US advanced by 7.2% m-o-m, mainly due to base effects, but retreated in Europe by 2.2%. Meanwhile, Australian benchmark thermal coal prices were up by 5.1% due to the impact of cyclone Debbie.
Agricultural prices declined by 1.4% in April, with average food prices dropping by 2.1%. Sugar, soybeans and palm oil declined by 9.0%, 6.7% and 3.7%, respectively. In the group of raw material prices, natural rubber prices fell by 15.9%.
Average base metal prices decreased by 1.6% in March, led by a 2.4% monthly decrease in copper prices and a 5.8% decrease in nickel prices. Average iron ore prices plummeted by 19.9% following lower steel prices.
In the group of precious metals, gold prices increased by 2.9% on average, on lower real interest rate expectations in the US following some deceleration of the economy in 1Q17.
In April, the Henry Hub natural gas index advanced. The average price was up by 21cent, or 7.2%, to $3.08 per million British thermal units (mmbtu) after trading at an average of $2.87/mmbtu the previous month.
The EIA said utilities added 67 billion cubic feet (bcf) of working gas in underground storage during the week ending 28 April. This was above the median analysts’ expectations of a 61-bcf injection. Total working gas in underground storage stood at 2,256 bcf, which is 13.7% lower than at the same time the previous year but 15.5% higher than the previous five-year average.