metals market outlook for 2019 - omnia · use forecasting strategies to make forward buys use...

Lisa ReismanMetals Market Outlook for 2019

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2019 Metal Price Outlook: Mitigating Price Risk


Today’s agenda

▪ Our forecasting philosophy

▪ 2019 long term forecast▪ Oct 2018 short term forecast▪ Tariff & 2019 price risk mitigation strategies▪ How we work with companies


The challenge is not:• Predicting what a specific price will be at a specific time• (If we knew that, surely none of us would be here!)

The challenge is:• Knowing how to source/buy/procure with greater confidence by

understanding where the market is and where it could go • And knowing when to change purchasing behavior

By re-framing the challenge, we developed an approach that has been “right” since product inception

Our forecasting philosophy


From a short-term or monthly perspective we look at:

• Trends of commodities• Industrial metals• The individual metal• Price and volume

From a long-term perspective we look at:

• Trends of commodities• Industrial metals• Fundamentals (e.g. supply and demand)

The approach


Price and volume


2019 Long-Term Forecast


Broad commodity trends Jan ‘10 to October ‘18


Industrial metals trends Jan ’10 to October ‘18


The USD vs CRB


China stock market


Aluminum long term outlook


Nickel long term outlook


CRC long term outlook


HDG long term outlook


October 2018 Short-Term Forecast


Aluminum short term outlook


Nickel short term outlook


CRC short term outlook


HDG short term outlook


Strategies to Mitigate Price Risk


Multiple ways to reduce metal price risk1. Implement strategic sourcing best practices

▪ Splitting out value add from metal component▪ Breaking out in greater detail those elements▪ Contractually “locking” said arrangement(s)

2. Forecasting/forward buys▪ Use forecasting strategies to make forward buys▪ Use forecasting strategies to “buy down” in falling markets

3. Financial hedging▪ Consider financial hedges for spend in excess of certain

thresholds (e.g. $1m)▪ Devise playbook, contract duration and thresholds


Example RFQ bid sheet


Forward buys can reduce price risk


The approachCarbon Steel• CME U.S. Midwest Domestic Hot-Rolled Coil Steel (CRU) (liquid)

• LME Steel scrap (liquid)

• CME HMS Scrap

Aluminum• LME Ingot

• CME Ingot (not particularly liquid)

• CME Aluminum MW U.S. Transaction Premium Platts (25MT) Futures (liquid)

• No OTC for aluminum

Stainless Steel • LME Nickel (liquid)

• LME Chrome (not viable)

• No OTC for Nickel

Hedging Options


Tariff Risk Mitigation Strategies


6 strategies companies use to mitigate tariff risk

1. Tariff code analysis2. Pareto analysis on part spend3. INCO-Term analysis4. Should cost analysis and modeling5. Alternative country sourcing6. Alternative domestic sourcing


2019 contract negotiations - RIGHT NOW!

1. Not indexing2. Avoiding long-term buys3. Adding HTS codes into part item descriptions4. Ingot/tolling arrangements5. Forming aggregated buying groups


MetalMiner primary services

Savings + Risk Mitigation

“As a Service”● Category

strategy ● Contract

negotiations● Strategic

sourcing

MetalMiner Tool Kit

● Annual Outlook● Monthly Outlook● Benchmarking

Aggregated Purchases and Group Buys - Beta

● Aggregating metal purchases across companies

● “Looking for a few good buyers 5052 H32 aluminum”


Tel: +1 773 525 9750Email: [email protected]: www.metalminer.com

mailto:[email protected]

metals market outlook for 2019 - omnia · use forecasting strategies to make forward buys use...

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