Evaluating And Implementing A Forecasting Model To Estimate The Aluminum Prices

Evaluating and implementing a forecasting model to estimate the
Aluminum Prices in CVG Venalum
By
Sixto A Lopez D
Report Submitted in Partial Fulfillment for a Master of Science degree in
Management of Logistics and Production Systems (MLPS) at the Ecole des Mines de
Nantes, France
Company Tutor
Luis M Salazar
Planning and Budget Manager
CVG Venalum, Av. Fuerzas Armadas
Puerto OrdazVenezuela
School Tutor
Chams Lahlou
Lecturer, Ecole des Mines de Nantes,
4 rue Alfred Kastler, BP 20722, 44307
Nantes, France
INDUSTRIAL INTERNSHIP FINAL REPORT
January 2010
Sixto A Lopez D Industrial Internship Final Report
2 | 2010 - CVG Venalum – All rights reserved for all countries. Cannot be disclosed, used, or reproduced without prior written specific authorization of CVG Venalum.CONFIDENTIAL – Privileged Information – CVG Venalum proprietary information.
INDEX NOTE
Report title:
An approach to reduce the error in the Price’s forecast in CVG Venalum
Placement title:
Industrial Project
Year:
2009
Author:
Sixto Alexander Lopez Diaz
Company:
CVG VENALUM C.A.
Address:
Av Fuerzas Armadas, Edificio Corporativo Zona Industrial Matanzas, Puerto Ordaz, Estado Bolívar,Venezuela
Number of employees
3.700
Company Tutor:
Mr. Luis Salazar
Role:
Planning and Budget Manager
School tutor:
Chams Lahlou
Key words:
Industrial project, forecast, time series, Aluminium prices, budget
Summary:
Along these years, the company (CVG Venalum) has been forced to go through expensive revisions on the annual budget plans, partially due to the notable discrepanciesfounded between the estimation of the aluminum prices and the real performance of the market along the year in study.
Until now the sources of aluminum price forecast had been the ones offered by the external information providers (exclusively by subscriptions), amongst them the most important is CRU, a London based company which provides a vast series of reports of pricing and market data, forecastsand market analysis and also news and costs, however over the last four year, partially due to the high volatility of the metals sector has placed substantial differences between the estimations and the real market prices provoking a negative impact in the company budget execution. Similarly, it has always been argued at management level the need of having our own sources of aluminum pricesestimations, which in combination of the external providers can definitely improve the forecasting precision and therefore reducing or eliminating midyear budget modifications or reformulations.
So, given that aluminium prices tend to have a significant degree of impact on the financial performance of the Company, coupled with the dominance of price variability over other factors that lead to variablerevenues over time at an operating smelter, the prime focus of this report is to analyze the ability of a time series forecasting model to predict future aluminium prices.
Sixto A Lopez D Industrial Internship Final Report
3 | 2010 - CVG Venalum – All rights reserved for all countries. Cannot be disclosed, used, or reproduced without prior written specific authorization of CVG Venalum.Acknowledgement
I give thanks to God for His mercies,
In memory of my beloved Grandmother, Eloisa, she will always be in my thoughts and prayers.
Thanks to my company CVG Venalum for giving me the opportunity to do this Master abroad and additionally
Thanks to The Venezuelan Government Institution “Gran Mariscal de Ayacucho” for the scholarship
I would like to thanks to my industrial tutor Mr. LuisSalazar for his support, besides I want to acknowledge my academic tutor Dr. Chams Lahlou from Ecole des Mines de Nantes for his guidance and encouragement during the period of the Industrial project and the Master itself, also I would like to express my gratitude to the Heads of the MLPS Program, Dr. Naly Rakoto and Prof. Pierre Déjax for their support and encouragement.
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Sixto Lopez...