The Iran war has hit Chinese prices of chemicals and fuel hard, but most prices -- including farm prices and fertilizer -- have risen at a modest pace of 5% or less since the war began in late February. Pesticide prices have shot up in sync with the 30-to-40% increases in other chemical prices.
The impact of the Iran war is hard to discern from China's official price reports, but they indicate impacts are concentrated on fuel. The March CPI was up 1% year-over-year, but it fell 0.7% between February and March. Consumer prices for energy used for transportation stood out from all other categories with an increase of 10% in March. Producer price deflation was reversed into modest inflation. The March PPI report showed ex-factory prices rose 0.5% in March after falling 0.9% in February. Producer prices for gasoline and natural gas stood out with a 15.8% increase in March, while producer prices for consumer items were down slightly.
We can discern a more precise picture of the impact across commodities from average prices of 47 industrial and farm commodities reported every 10 days by the National Bureau of Statistics. These are prices paid by enterprises. These prices show a much stronger price spike confined to fuel and chemical prices, while other prices rose more modestly -- including fertilizer, coal, and farm commodities.
Indexing the early-April price to the late-February price shows how much each price has risen since the war began at the end of February. The 14 commodities with the largest price increases are dominated by chemical and fuel commodities. Polyvinyl chloride led all commodities with a 77% increase, and sulfuric acid was second with 60%. Liquid natural gas and liquified petroleum gas rose more than 50%. Gasoline was up 39% and diesel was up 43%. Several other chemicals had price increases of 30-to-45%.
Metals, coal, and farm commodities were not significantly affected by the war. There were 17 commodities with price increases of 1-to-5% that included fertilizer, several key crops, coal, and chemical fertilizer. There were 8 commodities with price changes of less than 1% and 9 commodities had prices that fell 1% or more. Hog prices are in a free fall that began well before the Iran war, but the overall softening of the economy could have accelerated the drop. Weakness in pulp and cardboard prices reflect the soft demand for consumer goods. Flat prices for rebar, glass, and cement are consistent with a slowdown in construction.
Charts that index each price to its early January price show a discrete rise in the index after the late-February commencement of the war, buttressing the conclusion that the price increases are connected to the war. Impacts are most obvious for prices of gasoline, diesel oil, liquid natural gas and several chemical commodities.
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| Calculated from National Bureau of Statistics, raw material prices |
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| Calculated from National Bureau of Statistics, raw material prices |
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| Calculated from National Bureau of Statistics, raw material prices |
The war's impact on ferrous metals prices is less obvious. Prices had fallen slightly during February, and most recovered to varying degrees in March. Ferrous metals were still within 2% of their January level in early April. Prices of nonferrous metals zinc and aluminum fell during March.
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| Calculated from National Bureau of Statistics, raw material prices |
Farm prices in China were not seriously impacted by the war. Corn, soybean and wheat prices have been rising since last Fall due to heavy rains in certain regions that damaged last year's corn crop, prompted more inclusion of wheat in animal feed, and resulted in this year's winter wheat crop being planted late. Soybean prices are in a seasonal tight supply. The early April soybean price was up 6.6% from January, corn was up 4%, wheat was up 3% and rice was up 1% from January. Cotton prices are up 6% from January as chemical-based fibers have skyrocketed in price. Hog prices began falling before the war began and are down 20-25% since the beginning of the year. Agriculture Ministry prices show that egg prices fell about 8% since early February, but no livestock price shows a significant increase since the war began.
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| Calculated from National Bureau of Statistics, raw material prices |
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| Calculated from China Ministry of Agriculture wholesale prices. |
The price of pesticide (glyphosate) is the farm input most impacted by the war. Consistent with the impacts on chemical prices identified above, the price of pesticide reported by the Bureau of Statistics rose 37% between late February and early April. Urea prices were already rising in China before the war began and inched up an additional 3% in March. The price of compound fertilizer rose 5%.
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| Calculated from National Bureau of Statistics raw material prices. |
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