The forecast time period can help to determine what approach to take.

• Predicting short term (1 to 3 months ahead) price, supply and demand movements can be achieved through regular feedback from market players – traders/buyers/suppliers. Lead times, stock movements, trade flows, latest market developments (bad weather, major buyers in the market, transport bottlenecks) all help to provide a good indication of short term price movements.
• In the medium-term forecast horizon, supply/demand balance models can help to predict if a market will be in surplus or deficit. News flow is used to build up supply projections. Companies often announce projects in the pipeline with details of capacity, product range, start updates etc. Future demand projections for the manufacturing industry are dependent on the macro-economic outlook, with forecasts on industrial production (IP), automotive and construction sectors the key drivers.
• In the long term forecasting horizon, the further out the projection the wider the margin for error. However, long term (20, 30 and 50 years ahead) forecasts are especially important for industries. The cost of building a new plant can run into billions of dollars, often involving massive outlay on infrastructure to support the project throughout its life cycle. Long-term price forecasts are often formed from cost modelling a particular product. Through constructing an industry cost curve a company is able to benchmark its project against its competitors. Moreover, the highest marginal cost producer will set the long term market-clearing price of a product.