Status quo of the Raw Materials Industry
The strong fluctuations in the commodities market at present are based on tight supply and excessively high – in some cases even rising – demand. After a turbulent start at the beginning of the Corona pandemic, which included demand and price shocks due to restrictions, a global economic standstill followed. Prices recovered in the subsequent months and in some cases rose to levels never before seen. These fluctuations and price shocks of the past years show companies the need for flexible price management.
Current Challenges: Raw Materials
The strong price fluctuations on the market have initially meant a loss of margins for many companies. However, they currently offer many the opportunity to make long overdue price corrections and optimize earnings. Companies suffering from the effects of the Corona pandemic can hope for a recovery in demand and an increase in the coming years. However, potential risks such as demand corrections for commodities in the coming years should also be considered.
Competition
The commodities market is currently characterized by low barriers to entry and low competitive pressure created by increased demand. In some areas, however, competition will increase again in the coming years due to corrections in demand and adjusted supply. As the market is currently in a state of flux, companies should seize the opportunity to implement price adjustments. However, it is important to develop a flexible price management system, which can react to current supply and demand shocks.
External Factors
External factors also have an impact on earnings in the commodities sector:
- Fluctuation of exchange rates: The declining effective exchange rate and the associated appreciation of the euro make exports more expensive. As exports account for more than a third of sales in some areas of the raw materials sector, a negative effective exchange rate has a negative impact on the development of sales.
- Stricter regulation: The stricter regulation with the new Renewable Energies Act (EEG), as well as the EU environmental directives, has a strong impact on the entire industry.
- Sustainability & circular economy: The demand for more sustainable products and circular-economy production has increased more and more in recent years, forcing companies to adapt their portfolios to this demand. Concretely, examples of relevant topics here include waste reduction and resource and energy recovery.
- Certifications: In the course of pursuing sustainability, the demand for certified raw materials (e.g. low-emission products) is also increasing. These products force companies to restructure processes but offer the opportunity to open up a new market.
- Digitalization: Digitalization is another trend that has long since arrived in the industry. The use of information and communication systems as well as predictive analytics, i.e. the forecasting of future demand, will become increasingly relevant for increasing efficiency and earnings in the future.
- Covid-19 pandemic: The Corona pandemic led to a decline in industrial activities and an associated drop in sales. At the same time, many of the megatrends associated with the Corona pandemic acted as catalysts for technological innovation. In addition, the pandemic caused demand shocks and a shortage of supply, particularly in the raw materials market.
- China’s economic development: China’s high demand for raw materials will see lower growth rates in the coming years, so that competition will increase and export potential will decrease.
Earnings Potential in the Raw Materials Sector
To leverage potentials, we offer individual solutions for the following topics:
- Market entry: Development and implementation of go-to market strategies.
- Market & customer strategy: Development of a systematic market/customer segmentation and customer-retention strategy as the basis for long-term success.
- Digital sales enforcement: Identification of growth potentials of new as well as existing customers with the help of pricing or sales tools and implementation of digital solutions.
- Dynamic value pricing: Status quo analysis of pricing or discounting logics as well as implementation of modern portfolio pricing that reflects market dynamics and the value of a company’s own products. Leveraging of cross- and up-selling potentials.
- Sales excellence: Identification of sales potentials as well as implementation of sales trainings.
- Quick-win analysis: Identification of pricing and sales quick-win strategies.
- Multi-channel management: Identification of challenges in the multi-channel environment and development of an execution roadmap.
- Value-added services: Identification and implementation of mechanisms to increase customer satisfaction and revenues by means of a differentiated service portfolio.
- Incentivization: Analysis and incentivization plans for employees, resellers, and customers.
Learn more about pricing and distribution measures in the commodities market
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