Category Management: 2013 Direct Materials Price Forecast and Trends

For many procurement organizations focused on manufacturing category management efforts, 2012 proved a challenging year. Demand and price volatility and an uncertain economic picture across North America, Europe, and China often complicated sourcing efforts. And only a minority of organizations we know and work with outside of the CPG world ended up taking risk off the table through a formal hedge strategy.

Last week, I spent a few minutes talking to my colleague (and my better half) Lisa Reisman to ask about how MetalMiner is reading the commodity tea leaves heading into 2013. According to Lisa, "Metals are down across the board (almost entirely) since the start of this year."

But "one exception is the automotive sector [see MetalMiner's Automotive MMI which we consider to be one of the strongest performing sectors in the manufacturing economy for 2012. Overall, including automotive, we're expecting a solid commodity performance for 2013 and as long as nothing catastrophic happens in the economy (fiscal cliff notwithstanding, which will be addressed one way or another, by early next year). If you're not planning for at least certain commodity prices across the metals sector to go higher in 2013, you should be."

What should companies be doing? For one, "they should look at hedging if they are not already, particularly aluminum, and they should have already locked in a good portion if not all of their requirements for the first half of 2013 with their suppliers." In addition, Lisa recommends looking at supplier-centric demand aggregation opportunities to understand and act on underlying raw material pricing components at different levels of the supply chain. If there is one sector that's overhyped at the moment, it's precious metals – gold, platinum, etc. "Most of the rise in precious metals has already happened," she suggests.

Interested in tracking metals pricing on a global basis? Subscribe to our monthly MetalMiner MMI reports by clicking here (a free service brought to you by MetalMiner and Spend Matters).

- Jason Busch

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