metals market outlook for 2019 - omnia · use forecasting strategies to make forward buys use...
TRANSCRIPT
Lisa ReismanMetals Market Outlook for 2019
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 2
2019 Metal Price Outlook: Mitigating Price Risk
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 3
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
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 4
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
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 5
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
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 6
Price and volume
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 7
2019 Long-Term Forecast
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 8
Broad commodity trends Jan ‘10 to October ‘18
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 9
Industrial metals trends Jan ’10 to October ‘18
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 10
The USD vs CRB
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 11
China stock market
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 12
Aluminum long term outlook
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 13
Nickel long term outlook
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 14
CRC long term outlook
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 15
HDG long term outlook
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 16
October 2018 Short-Term Forecast
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 17
Aluminum short term outlook
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 18
Nickel short term outlook
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 19
CRC short term outlook
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 20
HDG short term outlook
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 21
Strategies to Mitigate Price Risk
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 22
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
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 23
Example RFQ bid sheet
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 24
Forward buys can reduce price risk
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 25
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
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 26
Tariff Risk Mitigation Strategies
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 27
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
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 28
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
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 29
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”
Copyright © 2018 Azul Partners, Inc. All rights reserved. Not for distribution. 30
Tel: +1 773 525 9750Email: [email protected]: www.metalminer.com