Price Volatility of Base Metals and Steel A Case of a Large Automotive Manufacturer
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Examensarbete för masterexamen
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Price volatility is experienced by almost all commodities. Geopolitical pressures, pandemics,
and material shortages are only a few of the possible causes to the price volatility. The thesis
thus studied the characteristics and impact of base metal and steel price volatility on a large
automotive manufacturer. The base metals and steel materials were chosen, as the thesis were
in collaboration with the large automotive manufacturer. The thesis applied both quantitative
and qualitative methods. Firstly, a literature study was initiated to identify causes of price
volatility and impact on organisations. The characteristics were then quantified, to enter the
regression analysis. The variables were analysed through an iterative, bivariate, and
multivariate regression process. The findings resulted in a descriptive model, that interpret
price volatility. Further, the findings from the impact of price volatility were then interpreted
to create the interview questions. The interview results were then analysed in comparison
with both the findings from previous literature and the results of the regression analysis. The
regression analysis resulted in three models. The results concluded a significant price
volatility spillover between energy commodities and the dependent variables. Further,
inflation and industrial production were both found to have polynomial relationships with
base metals' price volatility. For steel, polynomial relationships were found with both
industrial production and the input materials. The qualitative analysis found both direct and
indirect impacts on the case corporation. Increased risk premiums were the direct impact of
volatility. The indirect impact was related to the suppliers’ financial distress, which was due
to cash flow volatility impacting their financial performance. Suppliers' financial distress
increased the risk of bankruptcy, which transferred as a cost to the case corporation due to
long integration times. For future studies, it would be of interest to include the impact of
supply and demand as independent variables in the multivariate regression. Lastly, the
quantification of the indirect costs identified in this thesis would be of value.
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Price volatility, commodities, raw materials, base metals, steel, business impact, regression analysis, automotive manufacturing, purchasing