Thursday, February 23, 2012
Edition 34 (Sep 2011)
PREVIOUS EDITIONS
Editor's letter: Where markets go, commodities don't follow
"Another 2% off the FTSE today. What price sub-5,000 during August?" I speculatively tweeted on 4 August. That day, the index of the UK's 100 largest publically listed companies opened at 5,585, before dropping to 5,383 - the fifth consecutive day of losses. Within hours, all hell had broken loose.
The downgrading of US debt to AA+ by ratings agency Standard & Poor's that followed the next day was perhaps more symbolic than anything else (the interest rate on 10-year US Treasury bonds actually fell on the back of the news) but investors have been running for safety ever since.
This becomes evident from looking at the markets. As I write this, the FTSE is teetering around 4,950 after sliding 4.5% the previous day, while gold is at an all-time high, pushing $1,900/oz. This despite the best efforts of central banks and politicians whom have been conspiring to keep borrowing rates low, liquidity high and confidence levels afloat. (This last statement does, of course, exclude the Republican-led US Congress which, thanks to ill-advised political posturing over the US debt ceiling, almost led the world into financial Armageddon.)
So, why the financial-market analysis? Apart from the fact that there's no bigger current business story, it's fascinating to look at how equity trends over the past 12 months correlate with those of commodities.
By and large, aluminium and copper have traced the same path as the FTSE, including the recent drops. Zinc, too, except with a liberal dose of extra volatility thrown in for good measure. Platinum and crude can also be argued to have followed a similar trend over the past year.
But there it ends. The price of cocoa increased by 50%, before falling back by nearly the same this spring, cotton more than doubled (a sensationalist would say, nearly tripled) before settling down to pre-peak territory, while wheat prices go into the autumn months at exactly the same levels as they did in 2010.
Of course, that this is happening shouldn't come as a surprise. We operate in a complex world, where the impact of the so-called E7 emerging nations (China, India, Brazil, Russia, Mexico, Indonesia and Turkey) are making economic cycles and commodity markets much harder to predict. While the west teeters on the edge of a financial chasm, China builds another dozen power stations and gobbles up 47% of the world's steel.
We have entered the era of paradoxes, when downturns go hand in hand with material scarcity, when equity bears battle with commodity bulls. And for corporate buyers, it's a minefield.
PROCUREMENT FEATURES
- Editor's letter: Where markets go, commodities don't follow
Wed, 07 Sep 2011 09:13:52 - In Focus: LME responds to Aluminium battle
Tue, 06 Sep 2011 14:00:34 - Collaboration: Hand in hand with manufacturing
Tue, 06 Sep 2011 13:51:34 - In Focus: Recent deals bode well for procurement outsourcing
Tue, 06 Sep 2011 13:47:12 - People viewpoint: The difficulties of recruitment
Tue, 06 Sep 2011 13:43:59 - Technology: Smarter Mobiles revolutionise supply chain management
Tue, 06 Sep 2011 13:37:16 - Collaboration viewpoint: The CFO is listening
Tue, 06 Sep 2011 13:29:17 - Sustainability: Coca Cola Enterprises focuses on suppliers
Tue, 06 Sep 2011 12:33:56 - Cover story: Taking control of corruption
Tue, 06 Sep 2011 12:26:50 - Case study: Dixons Retail revenue generation
Tue, 06 Sep 2011 12:15:50
PROCUREMENT OPINIONS
Procurement organisations will need to attract and encourage adaptable, innovative and globally integrated talent in order to meet the challenges of an ever-changing function. Economic View: Cross-border risks to supply chains
European leaders' failure to deal decisively with the euro crisis, coupled with measures to re-impose border controls, risk making the eurozone a no-go area for international trade Interview: Centrica CPO Heather Rodgers
Embarking on a huge transformation project meant there's rarely been a dull moment for Centrica CPO Heather Rodgers. She tells David Rae about the huge task of better aligning the function with the business and the advantages it brought.
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