Durians or Lemons? Getting a Good Price for Steel

One of the big problems that steel purchasers have is “What price should I pay?”

In this email I’ll try and explain a little bit about steel prices and what they mean.

If you need to buy some steel and you Google steel prices – you won’t find much. A good starting point is the LME Steel Billet price which can give you some idea of how much a steel billet will cost. A steel billet is a lot cheaper than a heavy carbon steel plate and the two prices may not move the same way.

Another approach is to use services like Platts Steel Business Briefing and MEPS which collect data from traders, stockholders and mills to provide market price information.

For fabricators in Indonesia there are a couple of problems with this data. First you have to pay for it; more importantly though it is not very useful because they don’t have enough data to be able to get accurate prices. This is because Indonesian fabricators don’t buy enough imported steel for it to make an impact on world prices.

So what do you do?

The next step is to ask people for prices. If you search on the internet for the steel grade you are interested you will find a lot of steel stockholders and mills who can help you.

If you do this you will get a wide range of prices. Some offers will come from China offering Chinese steel; others will be of Korean steel from a local stockholder, or from a Korean stockholder. Others will be top end European steel – including shipping.

durianThe reason for the price difference is that all these companies can be offering different grades of steel. For example in Europe S355 can sell for between 600 euros/MT and 1100 euros/MT. At the bottom end you are looking at steel from China or Eastern Europe with a 3.1 certificate to -20. At the top you are looking at S355 G10 + M with Z35. The quality difference is huge, and so is the price difference.

So when you ask stockholders for prices you can often end up comparing Lemons with Durians – unless you are very specific in what you ask for.

And this can cause problems in procurement.

Procurement departments need to get prices for the technical spec that design and engineering need to use. If they don’t there can be a big painful price gap later in the project.

lemonIt also can become painful when using agents or traders who just pass on the grade information – and not the technical requirements. So you don’t get a quote that meets your needs.

The best way to get accurate prices is to provide a detailed technical specification. Technical evaluation of the proposal has to happen before commercial evaluation. Only then can you be sure that you have a good sense of what the price should be for the plate you are buying.

Be technical – don’t buy a lemon!

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