The pricing process is the most important component of any business model and decision making about it has a great impact on the company’s profitability. Each business must price its products in such a way that it can generate revenue commensurate with the value proposition for the customer and thus maintain its position-vis the customer (in front of customers, complementary goods, competitors and potential newcomers .) However, there does not seem to be any iron ore pricing strategy or principles in its pricing strategy!
*** Applications of iron ore
Iron ore is a metallic element that makes up about 5% of the earth’s crust. By extracting crude iron ore from the earth and separating its impurities, a dark silver-brown iron powder is obtained which is alloyed with other elements to provide more resistance for use in other industries. The largest amount of extracted iron ore (up to about 98%) is used to make steel metal. Steel is also used to make many tools and equipment such as cars, locomotives, ships, construction beams, furniture, paper clips, bicycles and thousands of other small and large devices. In fact, this metal is the highest in terms of consumption, Iran has 2.7 billion tons of crude iron reserves as the tenth country in the list of top 10 countries with reserves of this mineral in the world.
*** Indicators affecting the world price of iron ore
Various indicators such as steel price, GDP index, crude oil price, aluminum price, gold rate, interest rate, inflation, dollar value, stock value and iron and steel production affect the world price of iron ore. Given the importance of this metal in the world, the world price of iron ore is determined by the amount of supply and demand.
But in Iran, in the iron and steel chain, grammar pricing has become commonplace since the early 1980s, and since the entire chain, from stone to steel and even ingots, was state-owned and a kind of company, this model The Challenge In the mid-1980s, with booming exports to China and the expansion of private and small-scale mining, there were differences in domestic and export market prices, and efforts to influence and bridge the price gap gradually began. For example, in previous years, the price of concentrate has increased from 9% of the price of Khuzestan steel ingots to 11%, 13% and 16%, but this year no single agreement has been reached to determine the price of concentrate.
According to many manufacturers, the concentrations of iron ore concentrate and pellets are lower than the global ratios in Iran. In the long run, it affects the entire iron and steel chain, such as miners, steelmakers and downstream industries. The strategies of large mining companies must change from investing in the country’s mines to steel projects and even investing in other countries’ mines.
*** Iran’s perspective in the steel industry
Unfortunately, some strangers in the mining industry also think that miners are the ones who earn special points, extract mineral resources at the lowest cost, and sell at the highest price. However, mining in the world is basically a very expensive and risky industry. In the exploration sector, miners have to invest and spend a lot of time and money searching for minerals, which greatly increases the cost of producing this mineral.
Of course, in the last few years, steel companies have only sought to maximize their profits in the financial statements and provide positive annual reports to their shareholders, and what they have overlooked is that the main interests of steelmakers in the sustainable supply of raw materials. will be. According to the comprehensive steel plan and if the vision document of the Islamic Republic of Iran is realized in the horizon of 1404, the capacity of the country’s steel industry will reach 55 million tons. To meet this capacity, the extraction and production of 70 million tons of iron ore in 1998 must reach 154 million tons. Due to government interventions, the imposition of export duties, the mandatory regulation of concentrate, bullet and sponge iron prices, and the impossibility of attracting foreign investment, investment in this sector is falling sharply.
*** Repeat the recession boom cycle
So, with a brief look at the trajectory of mineral prices over the past decades, we see a repetition of the boom cycle of recession that this situation always happens and is seen frequently:
Increasing demand raises prices and encourages more exploration to increase supply.
With new discoveries, supply increases and prices fall after meeting existing demand.
Low-efficiency mines are bound to close and supply will be reduced again.
As supply declines, prices rise again and closed mines reopen.
The reopening of old mines is not enough to meet new demand, and prices are rising again.
*** Sustainable solution for balanced development of the country’s iron and steel chain
According to the above, a sustainable and long-term solution for the balanced development of the country’s iron and steel chain is to set prices based on the principles of supply and market demand and in a competitive and healthy environment. Therefore, in addition to increasing investment in mines, the incentives to export iron ore have also reached zero, and steelmakers will not have to worry about supplying raw materials.
Also, the pricing of concentrate and pellets should be based on the calculation of investment costs, conversion costs and shipping costs, after which the profit of the chain links is calculated and distributed. In this case, this pricing method is also fair and creates price stability in the market, because in an efficient market, prices are reflective. It is all information collected by all market participants and provides benefits to all iron ore producers.
این مطلب بدون برچسب می باشد.
ثبت دیدگاه