Commodity Inflation Outlook: Discovery of Unknown

Forecasting what happens tomorrow is a very challenging job, there are many factors that change the course and all you anticipated would have minimal value. It is said that knowing the future itself would change the future. Having said that, we in business must forecast the future business plan with what we know today and progressively correct the course of action as we move forward. Today, the world is highly unpredictable and supply chain disruption risk is significantly higher than what has been in the past. These disruptions are beyond control of any single political entity. This situation puts a lot of pressure on planning strategy. One of the key factors for future planning is commodity cost movement and supply situation, that might define how strong your bottom line is, and what is going to be your topline growth. Most of the market indices would give you lagging indicators hence we need to look at micro economic indicators to extrapolate for what is coming next.

Here below are few of commodity directions, for you to consider for putting rolling forecast in place for 2024:

Raw Material: 2023 has seen cost increase due to supply-demand dynamics and logistics disruption, +longer post covid recovery. In 2024, supply and demand might see smoothening, ferrous metal would stay flat or +/- 2% change due to demand supply shift. Some elemental key nonferrous might still see a 2-5% up surge due to dependency on specific country and prices would be governed based on political relations. Some of the chemicals would see a significant drop in price due to excess capacity in the market.

Energy Cost: Energy cost would ease out in Europe region; other countries might see slight decline in the energy cost but not significant change.

Labor: Labor availability globally is tight and increases in inflation, living cost would increase the labor cost. Anticipate 3-5% increase in labor cost in your plan.

Logistics: Demand Supply balance is increasing, better reliability due to additional capacity on board. Prices would ease out, anticipate 3-5% reduction in logistics cost with better logistics cost and delivery management.

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