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Webinar Notes: Realizing the Power of Market Intelligence in a Dynamic Global Economy

Webinar Notes: Realizing the Power of Market Intelligence in a Dynamic Global Economy

This week’s webinar notes are from an October 28th webinar hosted by Sourcing Interests Group and presented by Sherri Barnes, Director of Intelligence at Denali Group.

The majority of the event was a macroeconomic crash course, focusing on trends and anticipated futures for energy, commodities, and base metals. Although the direct take-aways were delivered generally, there were a few indirect lessons that should not be overlooked by a procurement audience:

  • Market intelligence makes smart buyers even smarter by making sure category strategies are not developed in isolation.

  • Most of Barnes information reflected expectations for the rest of 2014, projections for 2015, and in some cases extended into 2016. Procurement’s high level planning should do the same, especially in market-driven categories.

  • There are a few factors that influence almost everything – fuel costs are a prime example. All procurement professionals must have a working knowledge of relevant trends and how much each category is affected by them.

  • Procurement professionals are (naturally) focused on supply, but it is important to recognize that competing sources of demand can either increase the risk of scarcity or drive up prices as a result of increased buy-side competition.


Noteworthy Global Economies

Post-recession recovery has been easier for developed than developing economies because they are more diversified and resilient. As different as they are from each other, the economies of the U.S. and China set the pace. Europe (as a combined entity) forms the third most influential economy, and Japan is not to be dismissed. Although the other BRIC countries (Brazil, Russia, and India) are still growing, the pace of their expansion has slowed due to natural growing pains from the need for better systems and revised policies. The geopolitical disruptions Russia has gotten entangled in are acting as a distraction, and as a result Barnes recommended looking at Canada as another influential emerging economy.


Developments in Energy Markets

The cost per barrel of oil has fallen 20% since January, from $100 to $80. The breakeven price per barrel is somewhere between $55 and $70. If Mexico passes pending legislation to allow production, their output will be roughly equivalent to Texas. This is expected to be a factor in the second half 0f 2015, allowing time for production ramp-up. Electricity is another energy cost-component worth watching, although it is a less elastic category because of pricing regulations.


Slow Base Metals Rebound

As capacity is rationalized, supply will continue to chase demand and remains vulnerable to global headwinds. Metals markets have been flat, but should return to an upward trend in 2015 and 2016. Aluminum is expected to lead the way, driven in large part by increased demand from the automotive sector. Steel, the most responsive metal, is next in line with prices being affected by excess productions and high capacity utilization. Finally, copper, weak in part because of stockpiles in China, may see the introduction of new mines in 2015.


The high level domestic expectations as a result of these market trends include weak overseas markets, flat labor costs, and older workers staying in the workforce in response to down economies. Political cycles, both the midterm elections and the 2016 presidential election will impact businesses as well.

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