Cost control is #1 priority for metals companies: KPMG-sponsored report

Most metals companies see cost control as their top priority over the next one to two years as prices continue to exhibit high volatility, according to a KPMG-sponsored survey released today.

The survey, collated by The Economist Intelligence Unit and titled Global Metals Outlook: Manufacturing Resilience, said 51% of metals companies surveyed for this report see price volatility for key input costs as one of their biggest challenges over the next 12-24 months. Nearly 7 in 10 (68%) said that keeping costs lean is a top priority.

In another key finding, the survey found nearly a third of metals companies expect to expand through M&A in the next 12-24 months, compared with less than one-fifth of manufacturing companies.

Companies are also looking to locate assets closer to customers or suppliers, with 53% saying their organizations are considering localizing or customizing operations to improve the efficiency of their supply chain, says KPMG.

The survey concludes that metals mining companies are having to contend with persistent price swings by hedging against a possible downturn  and the resulting impact an oversupply of metals products would have on their bottom line:

To deal with sharp price swings, metals companies are adapting to their new environment. Businesses are expanding into upstream assets to manage volatility and to lock in access to key raw materials. Some companies are moving beyond resource self-sufficiency to become raw materials providers in their own right, selling at what remain historically high prices. Other metals producers are relocating closer to their end customer and diversifying into new products or market segments. This brings resilience, as businesses reduce their transportation expenses and build links across multiple local supply chains.

Link to the full report here