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Steel trading profit new model:

Nowadays, the steel market oversupply, steel trade and industry into the era of low profits, the steel trade, steel mills and end users are exploring how to avoid risks, to achieve profitability. Recently, the vice president of the Shanghai Steel Trade Association, Shanghai Steel Materials Co., Ltd., chairman of the five-wave RenQingping in the "China Metallurgical News" reporter, said that his company explore a locked price + steel mills, traders, jointly operated by the user mode, and achieved good effectiveness in practice.


Users can also face the risk of falling steel prices


"In fact, downstream users do not want steel prices continue to fall, the user, there are also a great risk." Ren Qingping representation.


Then, RenQingping example to reporters, a large domestic port machinery manufacturing enterprises to undertake a machinery manufacturing projects, the demand for various types of steel is about 30,000 tons. When determining the cost of manufacturing projects, around the level of the cost of materials such as steel, both sides highly controversial, because steel prices are now very transparent, a search online can know now what price to sell, but the key is in continuous decline in steel prices, not I know where the bottom. A few tons of steel, will be what price, for machinery manufacturing enterprises, related to the manufacturing cost and the Bottom Line. Ultimately, the machinery manufacturers agreed with the client, with the current market price of steel as manufacturing costs, to determine the cost of the machinery manufacturing project, the two sides signed the contract. At this time, steel prices have fallen to 10 years low. Shortly after signing the contract, the steel market prices rebounded, steel per ton higher than the signing of the contract 20 yuan to 30 yuan. The final completion of the contract when the machinery manufacturing enterprises, not only not profitable, but lost money, this is the steel prices falling to blame.


"So, the downstream end-users do not want steel market prices continued to fall. Steel ups and downs, the end user is also at great risk." Ren Qingping said.


Three win-win is the best profit model


Steel prices continued to fall in the face of adverse situation, steel mills, steel trade and end users are actively exploring risk-averse and seek profitable business model.


"After practice we have to explore a locked price + mills, steel trade and users together business model, and achieved good results." Ren Qingping "China Metallurgical News" reporter said.


A large domestic machinery manufacturing company to undertake a project abroad, including 8000 tons beams, channels, angles, H-shaped steel beam, and other companies are made responsible for providing Ren Qingping. Their companies and steel mills and end users together, the steel prices in the signing of the contract locked, the case do not rise up, the case do not fall down. Thus, the end user can lock the steel prices to measure the production cost and profitability goals. Steel trade can lock the price, provide pre-sale and after-sales service, distribution of steel, according to the same construction price fixing node, with earnings unchanged, avoiding the risk of price fluctuations in the steel market, just profit less. Similarly, for steel mills, has made the order, locking the price, the proceeds will not result in steel prices fell again and shrink, to avoid the risk.


According RenQingping revealed that 8000 tons including 7,000 tons of steel and 1,000 tons of hot-rolled H-beam other beams, channels, angles and other steel, his company began planning in March this year, signed a contract in April, is now available successfully 1,000 tons, the entire contract would be implemented in October by a large domestic steel supply. During the execution of the contract, the steel does not fall, does not enter the warehouse, shipped directly from steel mills, steel mills and end-user point-to-face handover. Thus, the steel trading business and users are reducing transportation and logistics costs.


"Lock price + tripartite joint venture" model allows mills, steel trade and end-users to avoid market risks, to achieve win-win situation, this is the best profit model. Whether electronic trading, futures or spot transactions, only steel, steel trade and downstream end-users form communities of interest, jointly and in order to avoid the risk of market prices brought achieve three win-win is the best steel trade patterns, but also the inevitable trend of steel trade industry.

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