Raw material prices: how you can forecast trends


    When it’s time to begin planning for raw material supplies and establishing how you manage your company’s production costs, there’s a key stage you need to look at: the price of raw materials. Performing this kind of analysis is not simple: you must take into account news of events that can increase or lower prices, such as pandemics, wars or natural disasters, as well as fluctuations in commodity exchange indices, like MACD, the Stochastic Oscillator and the Relative Strength Index (RSI).

    Before production begins, you should have a clear idea of the price trends of the raw materials you’ll need. This is a task for which artificial intelligence software, like virtual agents, can provide valuable support. If you think these are only for company CEOs to establish budgets, or to help the marketing and sales industry select the right strategy to implement, then think again. 

    The price of raw materials is another area in which artificial intelligence is the best option to help you steer a course through statistics and real-time monitoring. That’s because it reduces data processing time and provides forecasts on price trends that are reliable and effective.

    The price of raw materials: why you need it and how it works

    A simple summary of how variations in raw material prices work is to say that if a specific raw material becomes scarce, or if demand for products made with that material rises suddenly, then the price increases. Conversely, if there is an excess of the material or demand is lower than forecast, its price decreases.

    There are multiple factors you need to take into account when producing an estimate of prices, as all it can take is news of a political or economic event to cause price trends to fluctuate. For example, since 2020 and the Covid-19 pandemic, there has been a rise in raw material prices – a rise which is set to continue. 

    According to figures from the Prometeia-APPIA index (the Confindustria platform), 2021 saw a 70% rise in prices for the main raw materials, while PricePedia predicts that 2022 will be marked by an increase in the price of raw materials across all supply chains (paper, plastics, metals and energy). This scenario of price increases and extreme volatility will continue to play out for at least the rest of 2022, as Assolombarda confirms.

    The price of raw materials is therefore key for all companies who need to begin production for the new year, navigating a course through data analysis, statistics and macroeconomic news. Only by making the most accurate possible forecast of prices will you be able to plan procurement, as you attempt to purchase raw materials at a lower price and develop cost management strategies that allow your company to maximise returns on product sales.

    How to use artificial intelligence to forecast the price of raw materials

    The computational power of artificial intelligence also provides valuable support for calculating the price of raw materials. Thanks to the use of mathematical algorithms and their ability to monitor news and markets in real time, virtual agents can offer precise predictive analysis of raw material price trends and availability.

    This requires artificial intelligence software that can continuously monitor macroeconomic news and all the main exchange indicators (MACD, Stochastic, RSI) to list the raw materials most relevant to your company, providing historical trends and predictive analysis on a daily and weekly basis.

    Using price estimate forecasts from the virtual agent allows your company to develop its procurement strategy and, above all, its cost management strategy. By taking advantage of artificial intelligence you can establish production costs and a sales price that ensure you achieve the right balance between turnover and profit.