Commentary

Chairman and Chief Executive Officer S. Claus narrowly avoided an angry crowd gathered at the headquarters of Christmas Entertainments Inc following reports of a catastrophic failure in their Global Supply Chain. In what was seen as a deliberate leak to the press just days before the news of the appointment of Aptium Global Inc, Strategic Sourcing consultants, turned a dramatic decline in the company’s share price into the largest one day rise since the company went public in 2005.

Reports had been growing for the previous few weeks that there were problems at the normally secretive Christmas Entertainments, suppliers of presents to the nation’s children on December 25 each year, due to supply side disruptions and component cost increases from their Asian suppliers. In an unprecedented move Lisa Reisman, Joint Managing Director and Strategic Sourcing guru spoke  from the beach  to reporters from the Cayman  Islands Scribbler where she was vacationing for the holiday period. “Normally client confidentiality prohibits us from going public in these situations but in this case the company has specifically asked us to reveal details of the work we have been doing over the last few months to illustrate that matters are under control. Changes in the Chinese VAT rebate structure back in the summer and rising metals costs have meant many of the company’s component suppliers have reneged on contracts causing severe problems in the supply chain. Following a thorough review we have instigated a policy of dual sourcing critical components, hedging against metal price fluctuations and outsourcing logistics to a 3PL, following the shipping delays in October caused by a severe bout of Reindeer Flu,” she said. Read more

I mentioned to you a couple of days back that from time to time, I would share a few war stories on these virtual pages. But since we are still getting to know each other, I won’t be able to get into some of the more scandalous stories (like about a former boss of mine from my aluminum trading days who lived a parallel life to Marc Rich  — who incidentally was one of the most entertaining characters in the metals industry). You all might remember Rich as the guy who evaded taxes but who was pardoned by Clinton right before he left office (I think my former boss and Rich, in fact, knew each other from their Phibro days). Or how my first trading deal was with Carlos Slim (okay, not him directly but his company Productos Nacobre)…but those tales will also have to wait.

Today, I’m just going to share a quick tidbit about one of the firms Stuart and I used to work with in Russia called Rusal. I happened to type them into Google this evening just to check out their latest happenings and lo and behold, I found this article from Reuters about what their access to cheap Siberian hydropower has allowed them to do and that is to become the number one aluminum producer in the world. Back in my early trading days (1994 to be specific), energy was important but it didn’t seem to dominate the headlines as it does now. There were so many market inefficiencies and with a nascent internet, it was easy as a trader to identify un-competitive suppliers and subsequently undercut them. Moreover, the notion of vertical integration – shoring up energy supplies combined with the mining and or manufacturing processes had waned as companies were looking to shed non-core assets. But more recently, things have changed. Competitive advantage in the metals industries can be gained and lost based upon access to low cost energy supplies. We have seen Chinese suppliers duke it out for contracts with the winning supplier just undercutting its closest competitor by minimizing its energy costs.

We are also seeing buying organizations of all sizes doing more to identify the cost drivers behind the quotations. Just recently I heard of a Fortune 500 company seeking to implement a strategy of multi-tier sourcing in China. We also know of a small consumer products manufacturing firm seeking to do the same thing by aggregating component supplies across their Chinese supply base.   The challenge will be accessing the cost information from component suppliers. Without question, the times they are a changin’.

-Lisa Reisman

This may sound sad, but it’s true: We lie awake at night thinking about how manufacturers could save (or avoid spending) money on their metal purchases. It’s a strange thing to think about, but alas, someone has to do it. With this blog, we aim to take a global perspective on the issues, trends, strategies, and trade policies that will impact how you source and or trade metals and related metals services.

What kind of background do we offer? For the past three and a half years, we have been operating a boutique consulting firm called Aptium Global Inc., working with middle market companies to reduce costs for direct material purchases. Although we tried to position ourselves more broadly than just metals, companies continue to ask us for help with the global sourcing of metals, commodity hedging strategies, or plain vanilla cost reduction and cost avoidance assistance.

It isn’t illogical that the requests tend to be metals related. Both Stuart and I have backgrounds in this area. In fact, that’s how we became partners. We used to trade semi-finished aluminum and brought in some of the first Russian metal from a company called Rusal. We’ll share some war stories at a later date, but suffice it to say, importing Russian material in 1994 was not very popular. In addition, my grandfather was a metallurgist and my great grandfather started the first metals powder press company here in the US, which was sold in 2001 to GKN Sinter Metals. So in short, metals just may be in my blood.

Stuart, on the other hand, might not have any metals in his blood, but as a young industrial process and geology graduate interested in commodity trading, he kept gravitating toward metals. Soon Stuart was running an export department for a large metals brokerage, and he eventually decided to run a trading company, which is now the largest importer of aluminum bar products into the UK.

Essentially, we started this blog as a new means of communication, beyond the general musings or industry ramblings typical of many trade publications. Combining our metals backgrounds, we intend to offer commentary and opinions on news, trade issues, and other trends within the metals industry as they relate to organizations buying metals related products and services.

— Lisa Reisman