The price of Canada’s main export commodities soared 6.1% in April, marking 60.4% increase from cyclical lows in April 2009, according to Scotiabank.
The spike in the bank’s Commodity Price Index reading was largely attributable to the energy sector, as the price of Edmonton par price (light oil) jumped more than US$16 per barrel. That surge took oil to a level less than 15% below its all-time high set in July 2008. Even natural gas saw increased interest, as more U.S. nuclear plants than usual were shut down for maintenance.
The index will likely post a sharp correction in May, says Scotia commodity market specialist Patricia Mohr, as fears of a slowing Chinese economy drag on demand.
“Jitters over a mild growth slowdown in China and concern over the impact of high food and energy prices on global consumer spending and growth had been percolating through commodity markets in the second half of April,” said Mohr.
Growth in China’s industrial production slowed to 13.4% year-over-year in April, and May is expected to see the slowdown continue, as the central government moves to curb inflation. But Mother Nature is also to blame, as the Japanese disaster earlier this year reduced demand for Chinese-made autoparts. Droughts have also eaten into production, as hydro-electric power production slumped.
Still, the metals and minerals index was strong in April, gaining 7.8%. Coking coal hit a record US$330 per tonne for Q2 contracts, but this is expected to fall as Chinese steel mills reduce production over the summer.
Outside of China, the price of silver was hammered in late April when the Chicago Mercantile Exchange raised margin requirements for futures trading in that metal.
The Agricultural Index rallied strongly in April, gaining 5.5%–Mohr speculates that agricultural commodities may end up being the best performing sector over the balance of 2011, as demand surges for fertilizers and agricultural equipment.
Dry conditions in the U.S. drove a massive rally in the Canadian Wheat Board’s asking export price for No.1 grade wheat, which soared 73.4% (year-over-year) to US$459 per tonne. Flooding in Manitoba and soggy weather in Saskatchewan has delayed planting in Western Canada, which could also drive up prices.