Canada industrial and raw materials prices extend gains in September

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Canada industrial prices rise September

Highlights

Canada's Industrial Product Price Index rises 2.0% month over month in September, driven by a 12.1% increase in energy and petroleum products.
Chemicals and chemical products rise 3.8% monthly, led by petrochemicals up 9.7% and plastic resins up 11.0%, signaling broad input price pressures.
The Raw Materials Price Index jumps 27.0% year over year in September, with crude energy products up 52.2% and synthetic crude oil up 73.2%.

Energy and chemicals drive September price increases

As reported by Statistics Canada, the Industrial Product Price Index, which measures prices of products manufactured in Canada, rises 2.0% month over month in September after a 1.2% increase in August. The agency says the resumption of the conflict between the U.S. and Iran in August continues to push up energy and petroleum product prices in September.

Energy and petroleum products make the largest contribution to the monthly IPPI increase, rising 12.1% after a 3.7% gain in August. Refined petroleum energy products climb 13.7%, led by diesel fuel, up 18.4%, followed by finished motor gasoline, up 7.8%, and light fuel oils, up 15.4%. Excluding energy and petroleum products, the IPPI edges up 0.3% in September.

Chemicals and chemical products also post a strong monthly increase, rising 3.8% after a 0.3% decline from July to August. Statistics Canada attributes the increase mainly to higher prices for dyes and pigments, and petrochemicals, up 9.7%, while plastic resins rise 11.0% and fertilizers, pesticides and other chemical products gain 4.1%. Prices for fruit, vegetables, feed and other food products increase 1.1%, the largest monthly rise since May, driven by oilseed cake and meal, up 11.6%.

Year-over-year pressures remain broad across industry

The IPPI increases 14.5% year over year in September, marking a 24th straight month of annual growth. Most product groups post annual increases, with the largest contribution coming from energy and petroleum products, including diesel fuel, up 106.1%, finished motor gasoline, up 45.3%, and light fuel oils, up 99.4%.

Other major upward contributors to the IPPI on a year-over-year basis include unwrought gold, silver and platinum group metals and their alloys, up 31.9%, unwrought copper and copper alloys, up 46.3%, and unwrought aluminum and aluminum alloys, up 26.9%.

On the input side, the Raw Materials Price Index gains 4.8% in September, led by a 14.4% increase in crude energy products following a 7.1% rise in August. Conventional crude oil climbs 16.8% and synthetic crude oil rises 9.0%, while the RMPI excluding crude energy products slips 0.4%.

Not all raw material categories move higher on the month. Metal ores, concentrates and scrap fall 0.7%, pressured by a 1.2% decline in gold, silver, and platinum group metal ores and concentrates, while animals and animal products drop 1.1%, driven by an 8.8% decline in hog prices. Crop products rise 2.1%, supported by canola, up 3.7%.

The RMPI rises 27.0% year over year in September, accelerating from a 22.9% annual gain in August, while the index excluding crude energy products increases 13.8%. Crude energy products make the largest contribution to the annual increase, with conventional crude oil up 52.2% and synthetic crude oil up 73.2%, alongside notable gains in gold, silver, and platinum group metal ores and concentrates, up 32.7%.

In our earlier article on the spike in crude oil shipping costs, we explained how conflict-related risks on key tanker routes have sharply increased freight and insurance expenses, making transportation a much larger component of the delivered oil price. We also noted that these higher logistics costs can filter through to fuel prices and then into broader consumer and industrial inflation as importers and refiners face sustained cost pressure.

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