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MetalSignals  |  Metals Production & Storage

Manufacturer of Aluminum Building Products

The Challenge

A US-based manufacturer of aluminum building products produces aluminum doors, windows, and other products for the residential and commercial markets. The company purchases aluminum using a mix of spot and longer term contracts, and employs various strategies to keep their average price as low as possible, including long hedges and call options with positions in the aluminum futures market.

Due to the recent volatility in aluminum and other base metals prices, the company has seen steadily increasing average purchase price for their aluminum, due to a lack of pricing visibility for 3-month futures contracts in particular. Because the company is spending millions of dollars on aluminum each year, even a 5% increase in average price has a large impact on margins.

In addition, the company has several competitors with manufacturing operations in China, and needs to better track and forecast aluminum production, storage, and price, to better anticipate competitive threats from low cost competitor products, and inform overall product pricing strategy.

The Solution

Using RS Metrics MetalSignals, the customer was able to track trends at global aluminum production and storage locations, both running analysis within the app, and downloading data for use within their existing internal models that also include market data on aluminum consumption and demand.

MetalSignals is a web app that provides satellite-imagery based data, trends, and analysis for global Aluminum, Copper, and Zinc production and storage, based on changes in daily, weekly, monthly, and year-over-year growth in metal concentrate and finished product stored outside at hundreds of individual smelters and storage facilities. MetalSignals also rolls up the production and storage data for each location “by type” (e.g. aluminum smelters, zinc storage) to generate trends and signals that are predictive of exchange metal price and inventory. Users can create favorites lists of selected locations and groups of locations, automatically generate alerts and signals for periods of significant change, and generate shareable PDF report summaries.

Armed with data and signals that are highly predictive of aluminum price 1-month, 3-months, and 4-months out, the customer was able to redesign their purchasing and hedging strategy, which immediately began to reduce average purchase price even though price volatility was still high.

In addition, with data on individual aluminum smelters and storage sites in China, the company has much more visibility and confidence in its longer term product pricing strategy and response to competitor product price changes. With savings on metal purchases and better product pricing, the company is already benefiting from lower risk and higher margins.