Weak global demand drops commodity prices: TD
By SASHA NAGY
Globe and Mail Update
Weakening global demand dragged Canadian commodity prices to its lowest level in 21 months, a report from TD economists says.
The August edition of the TD commodity price index showed broad-based declines in prices in 12 of the 18 commodities on the index. In all, there was a 7 per cent decline in July that followed up a 5 per cent drop in June.
Natural gas and lumber sectors were the most pronounced decliners, while only prices of agricultural products bucked the downward trend.
"Although gains in crude oil and lumber prices early this month suggest a rebound in August, the scope for commodity prices to rally on a sustained basis in the near term is limited," wrote Craig Alexander, senior economist at TD Financial Group.
The global picture doesn't hold a reversal of the downward price trend until at least the fourth quarter of 2001, the report says.
Financial markets are optimistic that a U.S. recovery is in the offing, though recent economic reports suggest otherwise. Overseas demand is slackening, which reflects widespread manufacturing recessions in Europe and Asia.
"Any increase in commodity prices in the near term will have to come from supply adjustments by producers," said Mr. Alexander.
The prospect for turnaround in lumber and natural gas doesn't appear to be imminent, the report says.
The U.S.-Canada softwood lumber dispute will once again heat up, said Mr. Alexander, with the U.S. poised to impose countervailing duties on softwood lumber imports from Canada on Thursday.
Meanwhile, natural gas inventories are up 15 per cent in the U.S. over this time last year, which should take the edge off season price hikes this winter.
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