Commodities — Honey, Strikes and Nylon

Spend Matters welcomes a guest post from Nick Peksa of Mintec Ltd.

This week the spotlight will focus on the recent commodity price movements of nylon, ethylene, and honey, followed by a quick look at the economic consumer and employment sentiment at the back of 2011 for three major regions, US, China and the UK. How a country feels is always a great indicator to future commodity-related trends.

The price of man-made fibres firmed this week as the result of rising feedstock prices. In Asia, benzene prices rose due to high crude oil prices and a strong market situation in the US. Benzene is a key raw material used in the manufacture of the nylon feedstocks caprolactam and adipic acid. In the acrylic chain both propylene and acrylonitrile were up following good demand for derivatives as well as short supply from Asian countries.

Ethylene (Europe)
The price of ethylene in Europe has risen by 21% since the start of 2012. Ethylene prices are tending to rise at this time due to limited global supply and a rise in the cost of crude oil, natural gas and the key feedstock naphtha. Supply of ethylene, particularly in Asia is also reported to be limited due to maintenance at a number of important ethylene producers' in South Korea and Japan.

Honey US
The average price of honey in the US has increased by 6% year-on-year. There are reports that demand continues to exceed supply and most commercial US beekeepers are said to have exhausted their stocks of the 2011 crop. In the US demand for honey typically tends to be greatest in the holiday season at the end of the year, but prices thereafter fall in the spring as honey production steps up during the peak blossoming period. Currently beekeepers are preparing for the up and coming almond pollination in California. The US honey crop may be good this year as an unusually mild winter in 2011/12 is expected to be beneficial to bee colonies in the US.

Global working sentiment

US unemployment and employment rates
The US unemployment rate fell 2.35% in the month from December 2011 to January 2012 and has seen a 7.78% drop year-on-year. It is currently at its lowest level since February 2009 and this has given Wall Street a much needed boost. US financials have been keen beneficiaries from the boosted sentiment and this new data has raised hopes for economic growth prospects in the world's largest economy, the US. The US public are also reported to be starting to feel a lot more secure in their jobs which may lead to further spending. This could aid the global financial recovery and may help President Obama's re-election campaign in November 2012.

UK Labour disputes: Working days lost
The number of working days lost in labour disputes in the UK rose to almost a million at the end of 2011. In November 2011, in the UK, there were 988,000 working days lost due to labour disputes, the highest figure since July 1989. Most of the working days lost in were due to a one-day strike on the 30th November called in connection with a dispute over proposed changes to pension schemes for some public sector workers by several trade unions. Working days lost are defined as the number of days not worked by people involved in a dispute at their place of work.

Consumer Confidence - CN
The consumer confidence index in China declined to 97 in the second half of 2011 from 108.10 in June 2011. The Chinese consumer confidence survey measures the level of optimism that consumers in China have about the performance of their economy. Generally consumer confidence is high when the unemployment rate is low and GDP growth is high. China's GDP growth is reported to have expanded by 8.9% in Q4 of 2011, extending a slowdown that began at the start of 2011 and is expected to continue into 2012. Price inflation in China meanwhile has fallen back from a peak of 6.5% in July to 4.1% in December 2011. China's official urban unemployment rate was last reported at 4.1% in Q3 of 2011, which was the same figure as Q3 of 2010. China's urban unemployment rate is not an accurate gauge of the nation's unemployment because it only covers a small portion of the Chinese population.

- Nick Peksa, Mintec Ltd.

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