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Your customers may demand that you give them firm pricing for raw materials, but here are 4 reasons that say "Ain't gonna happen."
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Why yes, I can hold that price firm for the year" said no one in their right mind. Ever.
- BUSINESS CYCLE Business Cycle is currently in a downward phase. what savvy organizations should be doing right now is planning for budget reductions, cross training employees, evaluate vendors for sustainability. Nothing in the business Cycle justifies firming up pricing at this time.
- BIAS TOWARD GROWTH Everyone expects the prices of things to grow, particularly for commodity raw materials. The Steel Benchmarker chart for hot rolled steel band shows that this is hardly ever the case…
- VOLATILITY That Steel Benchmarker chart shows a price differential ranging from 4.5% in 2012 to a high of 100% in 2008. This is why your customers want firm prices, not why you should bet your business on giving them firm prices over which you have no control.
- DETERMINANTS OF DEMAND What is driving demand for the raw materials? is it even North American, or is it China or emerging economies? Global demand is typically what is driving prices here in US and around the globe. US GDP growth in 2013 was estimated to be 1.6% China's 7.5% Pick a number. Any number.
Editor's Note: CR4 would like to thank Milo for sharing this blog entry, which you can finish reading here.
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Re: 4 Reasons You Can’t Predict Firm Metals Pricing in 2014
