International markets have an impact on prices of industry in June
July 27, 2017 09h00 AM | Last Updated: September 04, 2017 09h21 AM
Iron ore, crude petroleum oil and soybean bran are among the main industrial products contributing to reduce the Producer Price Index (IIP) of June (-0.21%) against the May figure. The indicator measures the price evolution of products 'at the factory gate', without taxes and freight. “The three items, and their side products, have in common the strong impact from international markets” explains Manuel Campos, analyst at the IBGE’s Industry Department. The IPP had recorded slight positive change (0.10%) in May. The decrease caused the cumulative index in 12 months to fall from 2.24% in May to 1.52% in June.
Together, crude oil and iron ore accounted for more than 90% of mining and quarrying industry, the main responsible for the index decrease. According to Manuel, “the price of the oil barrel has fallen all over the world, mainly due to the competition between Middle East countries, such as Saudi Arabia and Iran. The production of iron ore currently faces a period of high international supply, led by China”.
Food industry has also been affected by the record harvest and by the real appreciation versus the dollar. “Soybean bran, a major export product, is sold at high prices in dollar in foreign markets, but currency rates do not benefit local producers” says Manuel.
Cheap raw material, expensive products
Against the widespread fall of prices, the basic metal industry recorded significant growth, mainly due to steel. Once again, China is directly involved, according to Manuel: “Besides being a major producer of iron ore, China also has a strong steel industry and exerts significant influence on steel prices around the world. Chinese iron has been highly valued in the last few months, and the prices of steel and other metals in Brazil have risen, as a result. That explains the current status of the sector.”
Text: Eduardo Peret
Images: Helena Pontes / Pixabay, Wikipedia
