LONDON--(BUSINESS WIRE)--SpendEdge, a global procurement market intelligence firm, has announced the release of its position paper on coronavirus impact assessment on the materials industry and risk mitigation measures to streamline sourcing and supply chain operations in this industry.
Highlights of this position paper
Analysis of the Coronavirus Impact on the Materials Industry
Clearly the rate at which the novel coronavirus is gaining control over the global economy is outpacing the readiness of industries in responding to this pandemic. Business from a global standpoint has come to a screeching halt as almost all the industries have pulled their shutter down to adhere to the pandemic guidelines. This has resulted in the demand for metals and other commodities take a nosedive according to the coronavirus impact assessment on the materials industry.
Meanwhile, suppliers who are still catering to the demand for minerals and metals from certain operating sectors are being plagued with a serious shortage of labor across the supply chain owing to the lockdown measures. This throws light on the alarming misalignment of the prospects of demand and supply in the materials industry and is a glaring revelation of the coronavirus impact assessment on this industry.
Findings in this position paper stress on the importance of the next weeks that are expected to exert major impacts on the demand curve as the coronavirus impact becomes more evident and troubling in the materials industry. However, initiatives undertaken by governments to revive their economies are expected to provide respite to the ailing enterprises in the materials industry owing to the coronavirus impact.
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Demand-Supply Trends Governing the Materials Industry Sectors
Suppliers in the materials industry are experiencing a surge in demand for metals that are used as raw materials to manufacture critical medical equipment. This surge in demand is particularly observed in regions that are identified as COVID 19 hotbeds such as the US, Italy, Spain as well as other countries that have an inadequate medical infrastructure to deal with the pandemic.
Demand-Supply Trends in the Metals Sector
- The visible decrease in economic activities owing to the coronavirus impact is resulting in a subsequent decrease in procurement in the materials industry. This is mounting pressure on supply chains as suppliers are experiencing a significant hike in their warehousing and storage of metals that are yet to be sold.
- To respond to the demand reduction, suppliers have halved their production. This can result in delays and a shortage of materials for buyers who are reliant on the steady supply.
Demand-Supply Trends in the Minerals Sector
- As a measure to address the worsening coronavirus impact on the materials industry, buyers are taking stock and re-establishing contracts with local vendors to reduce transportation-based risks arising out of the COVID-19 crisis.
- A majority of buyers are factoring in the invoking of force majeure clauses in their supply contracts with mineral suppliers. Such clauses are known to allow buyers a respite from a legal commitment to procure minerals. This will mount pressure on suppliers as new buyers are restricting themselves from entering into procurement deals with them due to the coronavirus impact on the global economy.
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Risk Mitigation Activities to Address the Coronavirus Impact on the Materials Industry
Avoid spot market buying
In this season of extreme demand and supply dynamics, it will be prudent of buyers to avoid spot market procurement as most suppliers are already committed to the requirement of contracted buyers due to the demand shortage. Procuring from the contracted supplier will not only ensure supply continuity but will also provide rate discounting benefits as the suppliers are accounting for an excess inventory.
Revisiting contract terms
Commodity and energy prices are expected to undergo frequent volatilities as the coronavirus impact intensifies on the global economy. This should be the cue for buyers who account for significant investments on commodities and energy items to re-engage their suppliers and explore strategies to immune them from the price volatilities. In the materials industry, it is advisable to fix the short-term procurement price or at least keep a maximum limit on upside price movements.
Local sourcing strategy
It is recommended that buyers procure from local suppliers to avoid any transportation-related bottlenecks that are caused due to the coronavirus impact. Such a step is also recommended keeping in perspective the global lockdown scenario.
To stay on top of latest trends and supply market information, check out SpendEdge’s knowledge center on coronavirus impact assessment.
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