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Determinants of the Price of High-Tech Metals: An Event Study

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Abstract

The growing demand for high-tech products has resulted in strong growth in demand for certain minor metals. In combination with production concentrated in China, this caused strong and unpredicted price movements in recent years. As a result, manufacturing companies have to cope with additional risks. However, the detailed reasons for the price development are only partially understood. Therefore, we analyzed empirically which determinants can be assigned to price movements and performed an event study on the high-tech metals neodymium, indium, and gallium. Based on our dataset of news items, we were able to find coinciding events to almost 90% of all price jumps (recall). We showed that if any information about these events occurred with a probability of over 50% there would also be a price jump within 10 days (precision). However, the classical set of price determinants has to be extended for these specific markets, as we found unorthodox factors like holidays or weather that may be indicators for price movements. Therefore, we hope that our study supports industry for instance in performing more informed short-term planning of metals purchasing based on information about specific events.

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Notes

  1. Details of the Metal-Pages pricing methodology can be found at: http://www.metal-pages.com/metalprices/our-pricing-methodology.

  2. Joulin et al. (2008) added an additional modulating factor s, multiplied with the moving average m. Thus, it is possible, by modulating s, to define smaller and higher jumps. For details and usage, we refer the reader to Joulin et al. (2008).

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Acknowledgments

We would like to thank the participants of the GeoHannover 2012 conference for the helpful discussion of our paper. We further thank the two anonymous journal reviewers for their valuable comments on our manuscript.

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  1. Institute for Materials Resource Management, University of Augsburg, Augsburg, Germany

    Markus Wanner, Tobias Gaugler, Benedikt Gleich & Andreas Rathgeber

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  1. Markus Wanner
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Correspondence to Markus Wanner.

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Wanner, M., Gaugler, T., Gleich, B. et al. Determinants of the Price of High-Tech Metals: An Event Study. Nat Resour Res 24, 139–159 (2015). https://doi.org/10.1007/s11053-014-9244-x

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