Forestry products buck downward trend in November: Scotiabank commodity index

TORONTO – The Scotiabank commodity price index dropped in November, leaving it 5.8 per cent below October and 10.4 per cent lower than the same month last year.

The only subindex to show a month-over-month gain was forestry products, up 2.2 per cent, while the biggest decline was in the oil and gas subindex, which fell 12.9 per cent from October.

For 2013 as a whole, forestry products have also outpaced the other three commodity subindexes — up 5.6 per cent year over year.

Scotiabank said Thursday that lumber prices have edged down since November but will likely bounce back early in the new year as buyers restock inventories ahead of the U.S. spring building season.

“U.S. housing starts jumped to 1.091 million units annualized in November (the highest since February 2008) and should climb to 1.15-1.20 million in 2014, lifting lumber prices to US$390 next year (about US$425 late-year),” Scotiabank economist Patricia Mohr wrote.

In the energy sector, crude prices have fallen due to a combination of seasonal and longer-term factors while natural gas prices have revived, due to an unusually cold U.S. winter.

Mohr wrote that November showed a wider gap between the price of a North American benchmark crude — West Texas Intermediate — and benchmark grades of Canadian light and heavy crudes.

This reflects rapidly growing supplies of U.S. oil from the Eagle Ford and Permian Basins in the U.S. Southwest and the North Dakota Bakken formation, an increasingly important source of crude for the United States.

“There is a critical need to build additional oil export pipeline capability, enabling Western Canada to diversify its oil markets away from the United States to Asia/Pacific and India as well as Eastern Canada,” Mohr wrote.

On a brighter note for Canadian producers, Mohr wrote that natural gas futures rose to US$4.35 per million British thermal units as of mid-December — a 30 per cent gain from a year ago.

“So far this heating season, U.S. winter weather has been 8.3 per cent colder than normal, pulling U.S. gas-in-storage seven per cent below a year ago. While natural gas prices remain historically low (especially in Western Canada) . . . prices have slowly recovered from a mere US$1.91 in mid-April 2012.”

Scotiabank’s metals and mineral subindex was down 1.8 per cent in November, compared with October and down 16.3 per cent from the same month last year, while the agriculture index dropped 1.1 per cent month over month and 11.5 per cent year over year.