Entries for January 2012


Deloitte just released an outstanding report, Tracking the Trends 2012, on the top 10 issues mining companies may face in the coming year. Some of the top challenges include rising capital costs, commodity price chaos, government taxes, and growing labor shortages. Many of these issues have a familiar ring. However, the Deloitte reports warns that: “The factors influencing the global mining industry are moving to a new level of extremity.”

The report is full of practical suggestions to tackle the top challenges, including new strategies to:

  • Bring costs under control
  • Manage commodity price volatility
  • Improve capital project management
  • Attract financing
  • Mitigate the risks of diversification and
  • Plan for unforeseeable amid greater volatility
Other key takeaways include:
  • Many opportunities remain to use automation as a tool to fight cost inflation      
  • Improved forecasting is needed to handle greater commodity price volatility
  • Key challenges have reached a new level of extremity and require improved collaboration across the entire global enterprise

Vale, Rio Tinto, American Anglo, and many other leading mining companies are fostering improved collaboration by using Triple Point’s end-to-end mining software solution, QMASTOR Pit-to-Port, to provide an integrated view of their global supply chain. This enables them to improve operations and maximize profit through efficient use of resources.  What are you doing to ensure consistent practices and communication across your entire global enterprise? Could an integrated view of your mining operations drive profits to a new level in 2012 and beyond?

Read the full Deloitte report.

Sirius-Solutions-LogoRecognizing that it needed a state-of-the-art software solution to effectively manage derivative valuation and hedge reporting for its clients, business consulting services firm Sirius Solutions chose Triple Point’s Commodity XL for Hedge Accounting™. Sirius is the latest in a long line of companies who are realizing that they need sophisticated technology solutions in order to manage the numerous, complex regulations that make hedge accounting a herculean task. The firm will be using Triple Point’s solution to automate the entire hedge accounting process and assist clients with hedge decision making, curve validation, mark to market valuation, financial reporting, and compliance.

In a recent press release Kristi Chickering, CEO of Sirius Solutions, commented: “An upgrade to our proprietary valuation solution was essential due to the growing and complex needs of our clients. Commodity XL will enable us to enhance our existing capabilities and provide more robust documentation while delivering the same deep hedge reporting, derivative advisory solutions, and superior service that our customers have come to depend upon.” 

Learn more

Sempra was an amazingly successful commodities trading organization in the 1990s and 2000s before forming a joint venture (being sold) with RBS in 2008.  At one point, Sempra had 44-straight profitable quarters.  I recently read a very interesting article about how newly-formed Freepoint Commodities, which launched its North American operations in March of 2011, is really a “restart” of Sempra.  David Messer, the former CEO of Sempra, is the CEO of Freepoint.  In addition, roughly two-thirds of Freepoint’s employees are former Sempra employees.

I particularly liked this quote by Mr. Messer: "We started trading in June and I think that's fairly remarkable to launch on March 1 and be trading 3 months later. I think that's testimony to the fact we've been able to reassemble a team that is highly experienced and has worked together. We're currently ahead of our plan."

I’ll add from a Triple Point perspective that’s it’s also important to choose the correct Commodity Management partner and solution.  Triple Point was able to implement Freepoint’s platform quickly to support its business requirements and also provide the robust functionality to support Freepoint’s rapid growth plans into additional commodities across the globe.

Enjoy,
Michael


The Commodity Management Blog has been closely following the top Commodity Management issues throughout the year. Not surprisingly, posts discussing Dodd-Frank top the list.  Below is a complete list of the 10 most popular posts over the past 12 months based on views and shares.  We thank you for following us and hope these posts have provided valuable tips on how to manage commodities smarter.


We have some really great things in store for 2012, so here’s to a year of fresh ideas for Commodity Management!

With the start of the new year, the US Legislature did not renew the 45-cent-per-gallon tax incentive for producing ethanol-blended gasoline or  the 54-cent-per-gallon tax on foreign ethanol imports.  The incentive cost taxpayers about $6B per year.  This ends thirty some odd years of government support for the biofuels industry.

The real beneficiary could be Brazil’s sugarcane/ethanol industry.  UNICA, the Brazilian sugarcane industry association, issued a press release titled “Time for the world's top two ethanol producers, the United States and Brazil, to lead a global effort for increased production and free, unobstructed trade for biofuels.”  According to Leticia Phillips of UNICA, “This means that in 2012, the world's largest fuel consuming market (US) will be open to imports of less costly and more efficient ethanol, including sugarcane ethanol produced in Brazil.”

It will be interesting to see how the US biofuels industry fares in 2012 and what the change in policy will mean to corn prices.

A December Financial Times article that reported oil price volatility in 2012 could swing between $50 and $150 a barrel might prove quite prescient.  The story, “Fat-tail fears catch oil traders between $50 and $150 bets,” noted that investors are concerned about events that could cause large swings in oil prices.

On the one hand, eurozone debt issues could drive oil prices much lower, but on the other hand, a crisis with Iran (or elsewhere in the Middle East) could send prices much higher.  In the last few days, we’ve seen the saber-rattling between Iran and the US send Brent crude rising by more than $4 in a day to $111.

At the risk of stating the obvious, the commodity volatility trend of recent years will continue in 2012. Rapid and large price swings are not going away - if anything, volatility is getting more extreme.  How commodity volatility is managed will be an incredibly important factor in determining company profitability moving forward.

The key phrase for organizations doing business in these volatile markets is “risk management.”  With the proper processes and systems in place, risk can be turned to competitive advantage.

Here’s to a profitable 2012 for all!

Events

Procemin 10th International Mineral Processing Conference

October 15-18, 2013 | Chile

XXV Brazilian National Meeting of Mineral Treatment and Extractive Metallurgy (ENTMME)

October 20-24, 2013 | Brazil



Opinions expressed on this blog are those of its individual contributors, and do not necessarily reflect the views of Triple Point Technology, Inc.