What is a market reference?

A market reference is a published series that shows how the market for a raw material or cost item moves: a commodity price per tonne, a producer price index for metals or an exchange rate. Each value comes with a source and a period, often a month. A market reference describes the market, not your purchasing: it is not a price you can buy material at.

How does a market reference work in practice?

Your purchase price for bar or plate includes much more than the raw material: alloy surcharge, form and size, sawing, quantity, stockholding and transport. So a reference gives a rough direction, not the level. A price quoted in dollars only says something about your euro price once combined with the exchange rate. Many series also lag: a monthly value appears only after the month has closed, a price index often later still; exchange rates, by contrast, are published daily. If your last purchase price is old and the series has clearly moved since, that is a reason to ask your supplier for a new price. In framework agreements a reference is often the basis of a price adjustment clause; the agreement then sets which series, which base value and which share of the price moves with it.

What is a market reference often confused with?

A market reference is not a spot price you can buy at, nor is it your purchase price: that is what your supplier charges, and it belongs in the estimate. Nor is it an alloy surcharge: the producer sets that per period for alloy steels, stainless for example, based on the prices of alloying elements like nickel, chromium and molybdenum.

How do you see a market reference in Blake?

For a material in your catalogue the market reference sits beside your own purchase price, with source and date, for example a series from the ECB, Eurostat or the World Bank. The material line uses your purchase price; the reference is never used as a purchase or live price. More on materials.