Economic Development and Manufacturing

Experts forecast 2015 commodities trends

Overall, commodities and industrial metals have been bearish since 2011.

October 10, 2014
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Experts in metals, plastics, packaging, and logistics and transportation looked into their crystal balls to help businesses plan for the year ahead during The Commodity Trends 2015 Outlook.

The Right Place, MMTC-West and the Supply Chain Management Council of West Michigan hosted the event at Western Michigan University’s Grand Rapids location.

Speakers included Lisa Reisman, managing editor of MetalMiner; Ramesh Iyer, vice president of commercial operations at Asahi Kasei Plastics North America; John Klein, vice president of sales and marketing at CorrChoice; and Rosalyn Wilson, senior business analyst at Parsons Corp.

Reisman began her presentation by telling the audience she has developed a new approach to studying the metal markets.

“Inventory levels are completely useless in predicting metal prices,” she said. “We don’t need to know how much or how fast prices of metal will increase.”

Instead, Reisman said it’s important to consider four factors: price, volume trends of commodities, metals in general and individual metals.

Big factors for the year ahead also include the strength of the U.S. dollar and the impact of China.

Reisman said while commodities started showing their first signs of strength since 2011, a strong U.S. dollar will keep metal markets in a downward trend in the year ahead.

Overall, commodities and industrial metals remain bearish since 2011.

There are a few strong performers, however, including aluminum, zinc and nickel. In the precious metals category, palladium and platinum could also do well this year, according to Reisman.

Plastics will be influenced significantly by the outlook for polypropylene, a market that will remain volatile in 2015 and 2016, according to Iyer, who noted that polypropylene is expensive in the United States in comparison to the rest of the world. If this trend continues, it will increase imports from Asia.

“China has become self-sufficient in polypropylene,” he said. “So markets in Asia which used to traditionally supply China have an excessive supply.”

Other factors to keep an eye on include supply and demand, Mother Nature and political unrest, particularly in the Middle East and Russia and the Ukraine.

The big news in corrugated cardboard continues to come from the rapid consolidation of the industry. Klein noted that, in 1984, the four top players in the corrugated cardboard market held 29 percent of the market share. By 2003, that percentage rose to 46 percent; in 2013, it was at 75 percent.

For 2015, the important box market drivers include inventory, which includes mills, box plants and what is in transit; weeks of supply and mill operating rates; input costs such as energy and labor; and availability and cost of raw materials.

Klein advised attendees to follow three strategies for the coming years: design packaging to the lifecycle of the product; involve the supply base in early design stage and packaging review; and maximize fiber utilization to maximize performance and cost.

Wilson delivered information from her recent “State of Logistics Report” covering the trucking, railroad and maritime industries. She noted rates were flat in 2013 for the trucking industry, while tonnage was up 6.1 percent. She said truck utilization rates remain close to 100 percent and fleet capacity is actually declining.

Driver shortages remain the top issue within the trucking industry, while new regulations are also having a negative impact.

The industry is working to combat its declining work force issues by raising wages in line with other similar industries, providing bonuses for good driving habits and decreasing time away from home for drivers.

Wilson said bankruptcies are on the rise, and Class 8 truck registrations declined 4.5 percent in 2013.

A slew of bad weather last year negatively impacted the freight industry and could do so again this year. Car and locomotive shortages are also troublesome for the industry.

Wilson noted locomotive manufacturers are booked through 2016 and into 2017, and one of the industry giants, Caterpillar, will be offline for a period of time, further inhibiting the locomotive supply.

In 2013, freight revenue increased 3.6 percent, revenue per ton-mile rose 2.6 percent, car loadings were up 8.1 percent, intermodal volume increased 10.6 percent, and ton-miles rose 1.6 percent.

The maritime industry is seeing rising costs of 4.5 percent in 2013. Wilson said ocean carriers’ financial positions slowly improved in 2013.

The industry also is becoming more consolidated, with the top 20 container lines now controlling 80 percent of the fleet capacity.

“Alliances are becoming prevalent worldwide,” Wilson said.

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