Commodity price concerns

24 August 2011
More bad news concerning commodity prices in the past few days. Speaking on BBC Radio 4’s Today programme this week, one of the world’s most famous commodity traders, Jim Rogers, based in Singapore, said he’s not expecting life to get simple any time soon. “We’re now in a period, and we have been for about 10-12 years, and we at least have about another 10-12 years to go, where commodity prices are going to continue to be firm. If the world economy gets better, then commodity prices are going to go through the roof because of shortages; if it does not gets better, commodity prices will still be firm, a, because of the shortages and b, because central banks will print money. Throughout history this has led to rises in prices of real assets, whether it’s silver, rice or natural gas, people try to protect themselves when money is being debased.” And last week, research by The Hackett Group found that while most expect commodity prices to increase by 6.3 per cent over the next 12 months, many have not decided how to deal with the rises. Basically, it concluded, a lack of practical experience dealing with inflation means companies are unprepared to cope. There are at least pockets of activity in the UK that counter this. A report by EEF - the manufacturers’ organisation - published this week, found nearly two thirds of the 100 manufacturers surveyed said they have sought other sourcing options to cope with rising commodity prices. They are devoting more time to developing procurement strategies, including seeking different sourcing options, renegotiating contracts and bulk purchasing. And elsewhere, the Technology Strategy Board (TSB) – part of the Department for Business, Innovation and Skills – has launched a £4.5 million research and development fund to help businesses encourage innovation within the supply chain to reduce reliance on key raw materials or lessen impact on the environment. What’s your organisation doing to lessen the hit of strong commodity prices?
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