After setting a record high in early March, the IHS Markit Materials Price Index (MPI) has been generally moving lower in the last three months.

With new construction activities likely to feel the impact of rising interest rates, key materials such as lumber and steel have moved lower in the past eight weeks. We expect to see a modest correction in commodity prices beginning in the second half of 2022. A combination of demand destruction and some supply-side adjustment points prices lower.

Global supply chains have been buffeted by overlapping shocks over the past two years: the pandemic with its series of variants; a set of energy crises, first in mainland China last summer, then in Europe over the winter; and now the Russia–Ukraine war. Prices are projected to peak in the 2nd quarter as they are unsustainable at current levels. Unfortunately, prices are not likely to retreat to the levels projected in the most recent IHS Markit forecasts even by the end of 2023 because of the East-West friction being introduced into supply chains. The low-cost efficiency of a truly global market may be a lasting casualty of the Russia–Ukraine war.

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