Run of diminishing commodity prices over

15 October 2009

16 October 2009 | Jake Kanter

The "golden decade" of falling commodity prices is over for buyers, according to an expert.

Robin Jackson, chief executive of procurement consultancy ADR International, said purchasers would be at the sharp end of inflated prices caused by government economic stimulus packages.

"All that new government-injected money sloshing about in the global economy classical economic theory tells us will drive the prices of commodities, goods and services higher," he said in ADR's October business briefing. "We can already see it starting to happen with key commodities, including copper, steel and oil, rebounding from their earlier lows."

Yesterday US crude oil prices reached a 2009 high of more than $77 (£47) a barrel, while gold has hit a series of record highs in the past month.

Jackson said: "The risk of doing nothing is high. Inflation indicators currently remain subdued but that doesn't mean inflation will remain asleep. When it reappears in 12 to 18 months, procurement will be at the sharp end of that government help."

He said buyers must start changing managers' expectations and convince them input prices will no longer continue to fall. At the same time, purchasers need to seek senior support to "upskill" their team in a bid to manage future inflation.

Jackson added buyers must improve forecasting and "condition" their supply base to stop price hikes being passed on.

SMoct2009

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