Industrial product and raw materials price indexes, June 2021

Released: 2021-07-30

The Industrial Product Price Index (IPPI) was unchanged month over month in June and up 16.8% compared with June 2020. The Raw Materials Price Index (RMPI) increased 3.9% on a monthly basis in June and 38.1% year over year.

Chart 1 
Industrial Product Price Index

Industrial Product Price Index

In June, the Industrial Product Price Index (IPPI) was unchanged on a month-to-month basis.

Although the top-level index was flat, 15 of the 21 major subcomponent groups were up, five were down, and one was unchanged.

The biggest influence on the IPPI in June was the decline in the lumber and other wood products (-6.8%) category. If lumber and other wood products were excluded from calculation, the IPPI would have risen 0.6%.

The movement in the lumber group was primarily due to lower prices for softwood lumber (-12.5%), which decreased for the first time in seven months. This followed a remarkable 118.0% ascent between November 2020 and May 2021. The descent in June was largely influenced by higher supply at sawmills. Market dynamics were complex, as data from the U.S. Census Bureau showed that housing starts in the United States were up 6.3% month over month, while building permits fell 5.1%. The US is the primary purchaser of Canadian softwood lumber. Currently available market benchmarks show that the fall in softwood lumber prices continues into July.

Chart 2 
Softwood lumber (except tongue and groove and other edge worked lumber) [24112]

Prices for grain and oilseed products (n.e.c.) fell 8.6% in June, following a yearlong rally. This product group includes canola oil, oilseed cake and meal, as well as soybean oil, all of which posted lower prices in June. Declining prices for soybean oil put downward pressure on canola oil in June, as these vegetable products can sometimes be substituted. In addition to their use for cooking oil and for animal feed, vegetable oils are also used as feedstock for biofuels. Many jurisdictions (globally) have mandates requiring refiners to blend a certain amount of this feedstock into biofuel, thus creating demand for those crops and their derivative oils. Speculation about possible regulatory changes in the U.S. biofuel market may have contributed to the decline in soybean oil prices. On June 25, the U.S. Supreme Court ruled in favor of small refineries, facilitating their access to waivers which exempt them from the mandate. Looking beyond June into July, heat and lack of rain in Western Canada have negatively affected canola crops and their yield.

Meat products (+3.7%) posted higher prices for a sixth consecutive month. Seasonal demand contributed to the ongoing upward trend, which was already fuelled by supply chain disruptions as well as higher prices for animal feed (in the months leading up to June).

Prices for basic and semi-finished iron or steel products were up 2.7%, a tenth consecutive monthly increase. Although the long-term trend for steel is increasing, the iron ore (used to make steel) market exhibited severe volatility in May and June, responding to speculation about the impact of regulatory policies in China.

Prices for the energy and petroleum products commodity group rose by 0.8%. Prices were higher for refined petroleum energy products (+0.5%). Higher prices for motor gasoline were offset by lower prices for gasoline blending components.

Year over year, the IPPI was up by 16.8%, an 11^th consecutive advance, following a 17.0% percent increase in May. This was mostly due to higher prices for lumber and other wood products (+102.1%), energy and petroleum products (+53.4%), as well as primary non-ferrous metal products (+29.4%).

Raw Materials Price Index

In June, the RMPI was up by 3.9%, a ninth consecutive monthly increase. Of the six main commodity groups, four were up, one was down, and one was unchanged. The main contributor to the upward movement in June were higher prices for conventional crude oil (+10.1%) and synthetic crude oil (+9.1%). This increase is attributable in part to higher global demand stemming from the easing of lockdown measures and distribution of COVID-19 vaccines. Production cuts by OPEC+ countries also limited supply, although these measures are being eased as demand recovers.

Prices for crop products fell by 3.1%, mostly due to lower prices for canola (-7.6%). This is mostly attributable to the same factors that are discussed above in the IPPI section on vegetable oils. Global market dynamics pulled prices down in June, and the near future looks uncertain for prices, as adverse weather has compromised crops in Western Canada.

Prices for softwood logs and bolts rose 7.9% in June, pulled up by higher prices for lumber that were observed in the months leading up to June.

Year over year, the RMPI was up 38.1%. This was mostly due to higher prices for crude energy products (+69.2%), canola (+74.6%), and live animals (+25.1%).

Chart 3 
Prices for raw materials rise

Contact information

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