The “Why” Behind How We Forecast Metal Prices

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Today we launch a series of posts designed to give you greater insight into what keeps us up at night.

Don’t miss this free download of our Monthly MMI® Report, covering price trends in 10 metals markets.

No, it’s not IBS – it’s how to better equip metal buying organizations with the right methods and tools to save money on their metal purchases.

The brief overview of MetalMiner‘s price forecasting methodology to follow (here’s a quick bullet list and a visual) is excerpted from our recently released report, “2015 Metal Buying Outlook: What Can We Expect for Base Metal and Steel Prices Over the Next 12 Months?

We isolate the key points where buyers should hedge their metal spend – in this case, for copper.

We isolate the key points where buyers should hedge their metal spend – in this case, for copper.

Will It Rain Today? Can’t Say

Let’s say a patient who smokes a pack of cigarettes a day enters a medical office and asks the doctor, “When will I get cancer?” The doctor’s response is likely to include recommendations to schedule regular office visits and to alter the patient’s habits – because, of course, the answer to the patient’s question is simply unknowable.

In that vein, if you hope to get an exact price forecast for the metals you buy 6 months or 1 year from now, at one point in time, you may be disappointed.

We believe that there is no need to waste your time trying to predict how much or how fast the price of a metal will rise. It’s not relevant. Lengthy reports analyzing annual metal production and consumption don’t appear helpful to industrial metal buyers. The same can be said of probability scenarios based on the consensus of multiple analysts.

Our job is to closely analyze the trends in the commodities market, the metal sector as a whole and each individual metal. By examining these 3 distinct elements, we are able to identify the points when the metal price has a high probability of increasing.

We hope to provide buying organizations with a better understanding of where prices will likely go through the year based on the current state of the market. We identify and analyze the drivers that buying organizations will want to keep an eye on throughout the year, and pinpoint exact price levels that should signal buyers to make changes in their sourcing strategy for any particular metal.

By analyzing and understanding these price drivers, buyers will be ready to react when the market gives clear signs that a new uptrend is developing and stay hedged as long as the trend is in place – until there is evidence that the trend is over.

What MetalMiner’s Exact Price Targets Indicate

Trends can last several years, and buyers should assume that prices will continue to move in the same direction until there is confirmation that the trend is over. The exact price targets to bear in mind (noted for most of the individual metals in the full report) serve as a confirmation that the trend is broken and there is a high probability of prices rising from there.

Therefore, when prices breach the target, that’s the right time to hedge/buy forward.

The Most Effective Tool

The best way to do the Boy Scouts proud and “Be Prepared”? Sign up for MetalMiner’s monthly price forecasts – learn more here.

In the meantime, download the full, free report below:


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