OMNIA Partners Blog

Sourcing Strategies for a Volatile Metals Market

Posted by OMNIA Partners on May 17, 2017

sourcing-strategies-metals-marketAt the recent Spring 2017 Prime Advantage Conference, Lisa Reisman of MetalMiner gave a Metals Outlook presentation on how procurement should approach the metals market and all of its fluidity. Reisman contends that most forecasters are notoriously inaccurate and that metal production and consumption numbers are largely useless to metal buying organizations. These numbers aren’t very actionable and fail to correlate to the timing of purchases. The chances of hitting a bullseye when prophesying based off of these figures is extremely small.

The challenge when forecasting is to refrain from trying to predict what a specific price will be at a specific time. Instead, the key is to know how to buy with greater confidence by understanding where the market is and where it is heading. And then to use this knowledge to change purchasing behavior accordingly. From a short-term perspective, you need to examine commodity trends, the state of industrial metals, individual metals, as well as price and volume. From a long-term perspective, aim to understand commodity trends, the state of industrial metals, as well as supply and demand.

Here are several considerations and strategies you can employ to help conquer the volatile metals market:

  1. Know what short-term trend your underlying metal is in. Decipher whether it is rising, falling, or trendless.
  2. Always buy on strength, never buy on weakness.
  3. Don’t try and time the market for the lowest of the lows. Lock in favorable prices in a percentage of known demand when your margins permit.
  4. Time short-term buys when prices fall close to support.
  5. Lock in forward buys at the early side of a trend reversal.
  6. Law low on asking for cost reductions in product adders like coatings and fuel surcharges.

By adding layers of strategy and making your moves based on what trend you’re currently in, you’ll have your best shot at making optimal decisions when sourcing metals.

Topics: Manufacturing, Procurement, Strategic Sourcing

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