The changing face of price indexes

Transcription

1 The changing face of price indexes October 15, 2012 Todd Petracek, About About The leading information provider for the global forest products industry Covering all sectors of forest products: timber, fiber, paper, packaging, solid wood Relied on by more companies in more parts of the value chain than any other source Global Independent

2 s recovered paper services PPI Pulp & Paper Week (incorporating Official Board Markets) Bench$mart recovered paper procurement cost benchmarking Monthly World Recovered Paper Monitor (incorporating Moore & Associates Fore$ight) Mill Asset Database The use (and abuse) of price indices Why use an index Reduces negotiating time Helps buyers and sellers get a fair deal Engenders trust (i.e. this way I know you aren t taking advantage of me on price changes)

3 Abuse of a price index Over-reliance on published price index as price setting mechanism At generator-processor level At processor-mill level Bidding up premiums Everyone can t be above average How OBM (and PPW) prices are changing and dimprovingi OBM/PPW price rationalization Oct - Dec

4 OBM/PPW price rationalization Jan News (6) - OBM* News (8) - OBM* Magazines (10) White News Blanks (24) Coated GW sections (44) * Prices for grades designated "OBM" are a continuation of the prices originally published in Official Board Markets (OBM, The Yellow Sheet) and are reported on the same basis as published historically in OBM. Greater accuracy Publication the 5 th of the month at 3 ET Combined editorial team More contacts -> more reliability Collaboration, checks and balances Implementation of IPRO code Governance, conflicts of interest, complaint handling, methodology compliance, etc. Other details Standardization of region names (Chicago/Midwest) ONP6 to be phased out determine price via formula

5 Methodology What IS changing Rationalize duplicate series Combined editorial resources of OBM and PPW more market contacts each month; checks and balances more accurate price reporting Prices published the 5 th of each month Standardizing region names What IS NOT changing Basic methodology and specifications Premiums will continue NOT to be reflected key is to capture the change in the market each month What prices represent An assessment of the open market price at which mills or exporters have purchased tonnage for delivery in the indicated month Domestic prices: mill purchases, FOB seller s dock Export prices: FAS Export prices: FAS Based on completed transactions not forecast or speculation

6 Calculation of prices Weighting of responses Better information counts more. Better information: Contacts with a history of reliability Contacts whose information stands up best to journalistic scrutiny Contacts who give more detailed information (e g POs) Contacts who give more detailed information (e.g. POs) Responses are weighted roughly by volume Basic concept: the mode, i.e. the most common value How we ensure accuracy Thorough representation: buyers and sellers, large and small players Ensuring input from a large number of contacts Investigative journalism method Check by another editor Specifications Measuring open market prices : all transactions except those with prices formally determined via contract Gross price (i.e. NOT including premiums) Deals for delivery in the indicated month D ti Mill h i FOB ll d k Domestic: Mill purchase price, FOB seller s dock Export: FAS Baled Arm s-length transactions (i.e. no internal transfers) Full truckload quantities Standard quality; no distressed lots

7 Communications about methodology Methodology to be published online Clarification of what s changed, what hasn t Posting of any methodology changes going forward New -- weekly export price index Starting a new price series, separate from OBM/PPW Weekly prices based on transactions submitted by buyers/sellers; audited Prices available only to those who contribute data Interested? t Contact t me Todd Petracek tpetracek@risi.com Thank you!