The impact of commodity price volatility on stock prices: a case study from the exhaust gas treatment industry within the stainless steel value chain

Heckmann, P 2022, The impact of commodity price volatility on stock prices: a case study from the exhaust gas treatment industry within the stainless steel value chain , PhD thesis, University of Salford.

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Abstract

Commodity price volatility (CPV), its impacts and potential price mitigation strategies along the stainless steel value chain are the subject of this research. The phenomena of price fluctuation attract increasing attention in literature, academia, manufacturing, and none manufacturing in-dustries like the banking industry. CPV has the potential to influence the prospects and the prosperity of companies, expressed in the share price. The share price is deployed as it con-denses these business prospects; hence, it is a gauge of the economic state of the company and future business expectations of the industry. The manufacturing industry faces an increasingly unstable business environment and a rising complexity. The recent pandemic outbreak (COVID-19) illustrates the vulnerability of the industry and the necessity of mitigation scenari-os. The term Volatility-Uncertainty-Complexity & Ambiguity (VUCA) describes this combina-tion in literature. The stainless steel value chain experiences price fluctuations and its impacts from the mining industry to the customers, like the exhaust gas treatment system producer. The competitiveness of the industry is determined by a high level of fixed costs, which is evident in steel production sites; and among others, is affected by raw material price fluctuations. The raw material may account for up to 70% of the product price. This commercial and hence financial situation challenges the stainless steel business. This research sheds light on the particularities of the industry with the means of statistics (i.e., Generalised Autoregressive Conditional Heter-oscedasticity (GARCH) and an Autoregressive Distributed Lag (ARDL) modelling). These statistic models help to gauge the time varying impact of the price variations and study the im-pact of CPV on share prices. These findings contribute to the risk management in the stainless steel industry by offering a forecast method and a selection of mitigation approaches. This re-search deploys times series models with multiple variables and hypotheses testing. These find-ings are transferrable to other industries. The investigation centred on an industry survey (questionnaire) and five in-depth interviews with stainless steel producers’ executives. This research will carve out the differences between the stainless steel producers while coping with commodity price volatility. Also, it addresses the existence of price mitigation strategies and the ability of companies to mitigate commodity price fluctuations. The experience and knowledge of commodity price volatility determines the selection of the mitigation scenarios to defend the financial stability of the manufacturing indus-try (e.g., automotive). The goal of this research is to study and measure the commodity price volatility, to help compa-nies to discover new opportunities and competition. However, this thesis will although assist companies in deploying mitigation strategies in case of disruptive phenomena and understand the risks associated to political and financial instability.

Item Type: Thesis (PhD)
Contributors: Papanagnou, C (Supervisor)
Schools: Schools > Salford Business School
Depositing User: PASCAL Heckmann
Date Deposited: 17 Aug 2022 07:35
Last Modified: 17 Sep 2022 02:30
URI: http://usir.salford.ac.uk/id/eprint/64446

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