Subject category:
Production and Operations Management
Published by:
WHU - Otto Beisheim School of Management
Version: 1 Jan 2013
Revision date: 17-Apr-2013
Length: 31 pages
Data source: Field research
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Abstract
The case study is based on a real-life problem situation of BASF Global Procurement Petrochemical Products. At this point in time the Global Procurement Petrochemical Products department sourced the entire global raw material purchasing volume to a major extent on the basis of contracts in the merchant market. The delta has been covered by spot market transactions. Despite the low volume, the spot market price in some commodities worked as a significant indicator of supply and demand in purchasing markets and hence, also served as an indicator for contract markets. Consequently the increasing volatility of the spot prices on the basis of ever rising numbers and trading volumes of speculators, such as trading houses, equally affected prices in contract markets. Since in some areas product prices of the business units using these commodities could not be adapted accordingly to reflect price changes in sourcing, margins became increasingly volatile rendering investment decisions a gamble.
Subject category:
Production and Operations Management
Published by:
WHU - Otto Beisheim School of Management
Length: 21 pages
Data source: Field research
About
Abstract
The case study is based on a real-life problem situation of BASF Global Procurement Petrochemical Products. At this point in time the Global Procurement Petrochemical Products department sourced the entire global raw material purchasing volume to a major extent on the basis of contracts in the merchant market. The delta has been covered by spot market transactions. Despite the low volume, the spot market price in some commodities worked as a significant indicator of supply and demand in purchasing markets and hence, also served as an indicator for contract markets. Consequently the increasing volatility of the spot prices on the basis of ever rising numbers and trading volumes of speculators, such as trading houses, equally affected prices in contract markets. Since in some areas product prices of the business units using these commodities could not be adapted accordingly to reflect price changes in sourcing, margins became increasingly volatile rendering investment decisions a gamble.
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Subject category:
Production and Operations Management
Published by:
WHU - Otto Beisheim School of Management
Length: 21 pages
Data source: Field research