Smart Sourcing Summit: No nonferrous stability foreseen
Stockpiling and speculation can mess up the market
Tom Stundza -- Purchasing, 10/15/2009 4:13:32 PM
Base metals' price increase in 2009 has had more to do with stockpiling and exchange-traded fund (ETF) investments than demand growth, says Lisa Reisman of Aptium Global, which works on direct material sourcing initiatives with manufacturing firms.
Speaking at Purchasing's Smart Sourcing Summit in Chicago, she says sales price volatility will continue in 2010 and add to the "normal risks" associated with supply disruptions-ranging from possible demand spurts in some regions, demand declines in others and inventory building in and out of China. Also, the growth in ETFs and other speculative money pouring into nonferrous commodities "must be accounted for" when trying to forecast 2010 pricing trends, she says.
In her presentation, Reisman says that hedging, while popular in the nonferrous metals, doesn't always work for some purchasing organizations. "The idea here is to reduce the risk of price change by purchasing in the futures markets" and "is workable for metals that are traded on an exchange." However, not all firms are able to take advantage of hedging techniques-especially if their buying volumes don't justify the exercise or the cost of the hedge is higher than the potential benefit."
Here's a quick review of some metals in the erratic world marketplace:
· Analysts agree that zinc price will continue to increase over the long term, but short-term (2010-2011) forecasts are all over map as views vary on future demand trends for galvanized steel products.
· Copper capacity investments have been virtually nonexistent for some time so any strong demand surge in China and North America could throw the market into supply deficit in 2010. She suggests that buyers should "buy on the price dips," particularly if the stock market ‘corrects' (that is, strengthens) next year "and the copper market moves up along with it."
· Lead prices have increased 150% since the beginning of this year and could keep increasing if global automotive products levels build and cause a surge in lead-acid battery building.
· Nickel may stay weak for the rest of this year and the outlook for stainless steel worldwide is so uncertain that buying forward to meet potential 2010 demand could be disastrous if prices slide again.
· Fast restocking and speculation (not demand growth) have been driving aluminum prices up in 2009, and the 2010 outlook for demand, supply and prices is muddy.
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04/01/2009Registration
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