MB Apex: Analyst Price Expectations methodology

The Metal Bulletin APEX is a unique system of combining the best research and analysis in metals prices to create the most accurate forecast available in the market. Metal Bulletin utilises analyst and market participant forecasts and combines them in a way that reflects the past performance of each analyst/desk. Analysts and desks which consistently call the market better in both the short-term and long-term than their peers are weighted higher in the model, and the leading analysts/desks for each metal are identified at the end of each quarter.

The Metal Bulletin APEX is a unique system of combining the best research and analysis in metals prices to create the most accurate forecast available in the market.

Metal Bulletin utilises analyst and market participant forecasts and combines them in a way that reflects the past performance of each analyst/desk. Analysts and desks which consistently call the market better in both the short-term and long-term than their peers are weighted higher in the model, and the leading analysts/desks for each metal are identified at the end of each quarter.

Apex
Metal Bulletin takes forecasts from established credible and independent analysts/desks and combine them in a weighted average to form a consensus forecast. The weightings are created from the past performance of the analysts, in both long term and short term forecasting, allowing those with the greatest skills and market understanding to have the greatest influence in the consensus forecast.

The APEX forecast is updated in real-time and new forecasts are integrated into the model as they are reported to Metal Bulletin. This allows the forecast to remain the best available and the collective intelligence of the market-place at any one point.

Forecasts can be updated as frequently as required to be included in the weighted consensus price expectations. The latest or prevailing forecast will be the one used at the beginning of the quarter for the analyst rankings calculations for that quarter.

Forecasts can be updated at any time. However, forecasts that are older than 6 months will drop out of the model.

Forecasts which are received on an annual basis are split equally across the quarters in the model.

Analyst Rankings
Each analyst/desk provides the latest forecasts for each metal at the turn of each quarter. This can be provided on a prompted basis, or will be taken from the most up-to-date published analysis available to Metal Bulletin.

At the end of the quarter a definitive ranking of accuracy in the forecasts will be calculated and published. The top analysts/desks in each metal will be published. The overall ranking is based on the average variance across all forecasts received.

As the quarters progress, Metal Bulletin will also integrate a longer-term, annual, ranking and weighting on the same basis. This will be combined with the short-term ranking to provide the weighting for each analyst.

Weightings
The use of weightings on accuracy allows the best analysts to have the greatest say in the forecasts.

The default vanilla position is equal weighting for all analysts, which can be flexed to a maximum of 50% of the base position in either direction. The top analyst is weighted at the base position plus 50%, and the least accurate is weighted at the base position minus 50%, with a continuous scale between.

New analyst entries to the model are treated as vanilla until the next quarter, when a weighting will be applied to their forecast for the following quarters.

Notes on the methodology:
Cash or 3M? – The analyst forecasts will be based on cash prices, to reflect the majority of forecasts in the market. In some cases analysts report forecasts based on three month prices, but where they have indicated that they can be taken as cash prices, we have included them in the consensus and rankings. All prices are in $/tonne. Forecasts provided to MB in c/lb are converted to $/tonne.

Which metals? – Copper, Aluminium, Nickel, Lead, Zinc, and Tin. Metal Bulletin will expand the range as required by the market.

Update frequency
– The model is updated in real-time, with data integrated on reporting to Metal Bulletin. The analyst weightings are updated quarterly.

How long do the forecasts last?
– Each forecast will be kept in the system for a maximum of 2 quarters, or until they are updated, whichever is the earliest.

How long do the rankings/weightings last? – The latest relative analyst weightings will remain in place until the end of the quarter, when the new weightings will be applied.

New analysts/desks
– New analysts are presumed to continue the intellectual strength of the desk or organisation that they represent, and inherit the current weighting of the previous analyst. New desks which have not previously published information, or where that information has not been made available to Metal Bulletin, are weighted at the default position until the first forecasts can be compared against the actual prices at the end of the month.

Quarterly or annual – The APEX is quoted in quarters across each year, although in some cases forecasts are provided on an annual basis for the years ahead. This varies from analyst to analyst, and Metal Bulletin will split the annual forecast into equal quarters as required.

Who can provide forecasts? – The APEX is open to all credible analysts/desks, although each institution is limited to one forecast, as being representative of the whole company.

Accuracy calculation – The accuracy rating reflects the % variance of the actual from the forecast. It is calculated as 100% minus the variance in % to the actual LME cash price.

Overall ranking – The overall ranking is a straight average of the variances of all forecasts received from each analyst across all metals as appropriate.

Cut-off date for rankings – At the beginning of each quarter Metal Bulletin will remind participants who haven’t already done so to provide their latest forecasts. There will be a cut off point, typically the second Tuesday of the month, for forecasts to be included in the rankings calculation for that quarter.

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