Inflation Continues Unabated: Watch the Chemical Sector

Now that crude has fallen about 20% and is considered in a “bear” market- Wall Street is breathing a sigh of relief.

Because if crude falls, that means that inflation is no longer a worry, right?

Gasoline has fallen about 20 cents a gallon in recent weeks, enough so that it seems “cheap” at the pump.

Wall Street seems to think that means all the other crude-related items that were rising as crude prices went up will also come back down.

Not so fast.

Ask any chemical company what is going on and you’ll get the following answer:

Prices continue to rise.

I just talked to someone in the chemical industry (yes- it’s my brother again) who filled me on a few of the price hikes happening in just August alone.

Caustic Potash is going up 25% this month.

Caustic Soda is now at record levels. Usually it sells for about $250 a ton. Right now, it’s selling for $1200 a ton. Apparently, one of the distributors had software that wouldn’t let them input four numbers into the system (for $1000 a ton, for example) because it has never, ever been that high.

Chemical companies are seeing some relief on Mineral Spirits prices, mainly from Marathon which really hiked prices and is now pulling back on some of them.

These kind of price increases are simply insane.

Price Inflation Will Be Passed Along

Eventually, these price increases will be passed along to the consumers through higher prices. It is only a matter of time.

No industry could absorb these kinds of increases without raising prices themselves.

This is all inflationary in the system.

In order for chemical prices to decline, crude would have to decline more severely and stay low for months. And even then, it would take months for the chemical prices to start to go lower. Once the increases are priced into the system, they’re hard to erase.

How’s that for some uplifting Friday news?

The chemical sector should be watched. As I’ve said before- it’s the building block for most American products and industry.