The recent rise in commodity prices has brought great pressure on the global steel industry. Tata Steel’s Managing Director, HM Nerurkar, has called for this, and the iron ore supply contract should return to the annual pricing mechanism.
Nerurkar said that in the past, raw material suppliers and steel companies had signed annual contracts, and some suppliers had mergers last year, resulting in a reduction in the number of suppliers, and the uniting of raw material suppliers with steel companies. Negotiations changed the annual communication contract into a quarterly supply contract, which caused price fluctuations on a quarterly basis.
It is understood that in iron ore or coal trading, only 20% of the world's total transactions are spot transactions, and 80% of the total volume is purchased on annual contracts. Nerurkar believes that the best solution to price fluctuations in raw materials is to call on suppliers of raw materials to return to the annual pricing mechanism to avoid seasonal fluctuations.
The rise in commodity prices has brought great pressure on the global steel industry. According to statistics, the average profit of Chinese steel mills last year was only 2.84%. Nerurka stated that iron ore raw materials in the iron and steel industry accounted for 70% of corporate costs, and Tata’s profitability was also affected, but the cost was increased mainly through three methods. Control to the lowest.
The first is the formulation of a global strategy, constantly seeking to own more raw material supply; secondly, promoting the improvement of efficiency and cost reduction of the production chain; and, in the Indian domestic market, adopting a unique arrangement to make use of the automotive industry and construction industry. High profit margins offset the impact of rising steel costs.
Nerurkar said that in the past, raw material suppliers and steel companies had signed annual contracts, and some suppliers had mergers last year, resulting in a reduction in the number of suppliers, and the uniting of raw material suppliers with steel companies. Negotiations changed the annual communication contract into a quarterly supply contract, which caused price fluctuations on a quarterly basis.
It is understood that in iron ore or coal trading, only 20% of the world's total transactions are spot transactions, and 80% of the total volume is purchased on annual contracts. Nerurkar believes that the best solution to price fluctuations in raw materials is to call on suppliers of raw materials to return to the annual pricing mechanism to avoid seasonal fluctuations.
The rise in commodity prices has brought great pressure on the global steel industry. According to statistics, the average profit of Chinese steel mills last year was only 2.84%. Nerurka stated that iron ore raw materials in the iron and steel industry accounted for 70% of corporate costs, and Tata’s profitability was also affected, but the cost was increased mainly through three methods. Control to the lowest.
The first is the formulation of a global strategy, constantly seeking to own more raw material supply; secondly, promoting the improvement of efficiency and cost reduction of the production chain; and, in the Indian domestic market, adopting a unique arrangement to make use of the automotive industry and construction industry. High profit margins offset the impact of rising steel costs.