This past week (specifically, on June 10) I received a metals report dated May 2010. And though the dates were slightly incongruous, the report piqued my curiosity. I always like to see what other organizations (and even competitors) report in terms of metal price forecasts. What immediately caught my eye with this particular report relates to the price direction it gave for four metals markets, specifically steel, copper, aluminum and nickel. Oddly enough, the price arrow direction pointed upward for all four metals! HmmÂ¦that clearly doesn’t square away with much of anything we have reported or seen lately. So what gives?
The report outlines several data points for each of the above-referenced commodities. Here is a sample of a few key points that I found striking:
- Copper “Copper prices rose on improved fundamental demand in March
- Steel “Manufacturing sector demand increased, non-residential construction falls
- Nickel “Nickel prices climbed higher on rising demand and higher scrap prices
- Aluminum “Aluminum prices climbed higher on rising demand and higher scrap prices
We couldn’t quibble with the findings had the report been dated April 2010 (and therefore released in April), but with the exception of some current commentary on the steel market, specifically that steel prices could temporarily fall if demand pauses and imports increase (both of which we have reported as happening), we have to question the value of reports like these. For example, if the report had gone out with a “promotional material only — current issue available via subscription caveat, then certainly this rant would be unjustified.
But as we like to say, “looking at yesterday’s weather forecast won’t tell you what to wear tomorrow, (unless you live somewhere tropical). Historically, rear view mirror analysis and data points will tell you nothing about tomorrow’s market direction. And though we don’t want to destroy our own integrity by stating how MetalMiner examines the market and makes price forecasts (click on the link above to see our philosophy), we would argue that metal sourcing organizations need to ask themselves: does it make sense to analyze historic information in an attempt to understand future scenarios? Or, does it make more sense to analyze current market variables, their volatility and direction, and assign weights to those variables and attempt to make sense of future price forecast scenarios?
We’ll let you make that call.
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