Chinese metal traders require the missile systems to lower prices

Burdened with excessive reserves and fallen demand for metal rolling, some Chinese metal traders demanded that the country's metallurgical plants provide them with a discount for paid but not yet received metal. Corresponding letters that clearly illustrate the drop in prices and demand for steel in China got into the eyes of the ubiquitous Reuters.

As you know, more than 90% of the total sale of ferrous metal rolling in China occurs through large and medium metal traders, which are able to seriously affect the cash flows of the country's metallurgical plants. Typically, traders pay for the full prepayment in the plant, and then sell the metal distribution received to the final consumer, for example, producing external boilers with a deferred payment or on credit, as our enterprise once practiced. Such a scheme for the sale of metal products largely facilitates the financial burden on the manufacturer. However, for some reason they don’t think so in Ukraine.

Meanwhile, with a slowdown in the Chinese economy, local metal traders took on the main blow. Today they are faced with the problem of growing inventories of metal products, which are depreciated daily. Against this background, the requirements of merchants to provide them with a discount on metal seem reasonable.

“If traders stop buying metal rolling due to serious losses, and manufacturers will not meet them, then the chain will close the manufacturer, which will ultimately lose much more,” says the Yucheng Analyst Shanghai Xiben New line Co Ltd.

“China’s metallurgical plants make every effort to shift their growing costs to end consumers, some of which, as we recall, make external boilers using metal traders. However, buyers refuse to assume additional expenses in connection with the fall of demand and the extreme in this situation are traders, ”said Huang Yainzhe, deputy chairman of the Hangzhou Yuanje Hangzhou Association. “The current procurement mechanism was formed when traders had the opportunity to raise prices, now it should fundamentally revised.”