First I will say that these numbers are far from exact, I just did a VERY rough estimate from Kapitools information, and I believe I calculated wrong...
But I came out with the variable cost of 1 steel around 15c's, and I'm trying to understand A. where my math is wrong, or B. why the suppliers have managed to keep the price so unbelieveably high if my math was correct. (or C., why I don't restart and get into steel with margins so big!)
Thanks in advance for any clarifications/numbers that can assist my understanding.
Ash
Why is steel so expensive?
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Guest
A: u math isent wrong i think (i did get 21c each steel) guess that close enouge.
B: 1.Demand/Supply, there are less steel produced then then needed.
2.The cost of resources to steel at the market is like 70c if u buy them all
3. profite on steel isent way hige it just very easy to sell it. if u invest 200k u get 1.3M back. If u invest 200k in gas and sell it u own stores u can get 2M back.
C: There will always be a hige demmand for steel and a resett wouldent help on that.
B: 1.Demand/Supply, there are less steel produced then then needed.
2.The cost of resources to steel at the market is like 70c if u buy them all
3. profite on steel isent way hige it just very easy to sell it. if u invest 200k u get 1.3M back. If u invest 200k in gas and sell it u own stores u can get 2M back.
C: There will always be a hige demmand for steel and a resett wouldent help on that.
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Guest
When calculating the cost of steel, did you factor in the raw materials? You probably did one of two things:
A. Didn't take into account the raw material cost, since as far as I know, Kapitools doesn't tell you the raw materials. If you take the materials at market price, steel actually costs 80-90c.
B. Did take into account the raw material cost, but calculated them based on their respective raw material costs, such that the sum of all the raw material and production costs ends up fairly low. The problem with this analysis is that you're assuming that one owns the entire production chain, where the high calculated profit of steel is offset by the large cost of purchasing those buildings.
A. Didn't take into account the raw material cost, since as far as I know, Kapitools doesn't tell you the raw materials. If you take the materials at market price, steel actually costs 80-90c.
B. Did take into account the raw material cost, but calculated them based on their respective raw material costs, such that the sum of all the raw material and production costs ends up fairly low. The problem with this analysis is that you're assuming that one owns the entire production chain, where the high calculated profit of steel is offset by the large cost of purchasing those buildings.
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Guest
I submit that the price of Steel isn't that high. It's the price of Coal, Iron, and Minerals/Chemicals that's high. Considering that, Steel's kind of cheap. Remember just because you get the money at the end doesn't mean your earlier facilities don't deserve to get paid too. (You Pigs producers might want to underline that last sentence, look at the price of corn, and re-evaluate.)
Lets take as a base power at 0.06, water at 0.07. From that everything else can be derived:
Coal: 10power + 7water + 0.09c = 1.18 cost. Selling price, about 10.00
Iron: 10power + 7water + 0.27c = 1.26 cost. Selling price, about 10.00
Minerals: 9power + 9water + .16c = 1.44 cost. Selling price, about 10.00
Then process Minerals into Chemicals:
Chemicals: 1minerals + 10power + .46 = 11.06. Selling price, about 20
(Notice two things - first, I used the market price for Minerals, not the product cost. Why? Because either you bought them and paid 10, or you could have sold them and gotten 10 for them that way. The second thing is that chemicals have been swinging around a bit. A week ago I was buying them at 13. Now I'm selling them at 22. I picked 20 as a reasonable spot.)
Now we can consider Steel:
Steel: 5coal + 2iron + .5chemicals + 200power + 15 = 107
The most you're likely to net for your steel is 128 on a direct sale. That's a profit of 11 from the Steel. And your starting factory makes 535 per day. 5885 profit per day from making steel. Your same factory could easily do double that making gas.
Should you be a Steel producer? Seems like the real money is in mining, doesn't it? A mine in yellow is a bit more expensive to build than a factory in red, so arguably it should be a little more profitable - but not that much. Economics are telling you to build a mine. Until people do, the prices won't come down. If input prices remain high, then making steel isn't that profitable. Which means the price of steel really won't come down.
Lets take as a base power at 0.06, water at 0.07. From that everything else can be derived:
Coal: 10power + 7water + 0.09c = 1.18 cost. Selling price, about 10.00
Iron: 10power + 7water + 0.27c = 1.26 cost. Selling price, about 10.00
Minerals: 9power + 9water + .16c = 1.44 cost. Selling price, about 10.00
Then process Minerals into Chemicals:
Chemicals: 1minerals + 10power + .46 = 11.06. Selling price, about 20
(Notice two things - first, I used the market price for Minerals, not the product cost. Why? Because either you bought them and paid 10, or you could have sold them and gotten 10 for them that way. The second thing is that chemicals have been swinging around a bit. A week ago I was buying them at 13. Now I'm selling them at 22. I picked 20 as a reasonable spot.)
Now we can consider Steel:
Steel: 5coal + 2iron + .5chemicals + 200power + 15 = 107
The most you're likely to net for your steel is 128 on a direct sale. That's a profit of 11 from the Steel. And your starting factory makes 535 per day. 5885 profit per day from making steel. Your same factory could easily do double that making gas.
Should you be a Steel producer? Seems like the real money is in mining, doesn't it? A mine in yellow is a bit more expensive to build than a factory in red, so arguably it should be a little more profitable - but not that much. Economics are telling you to build a mine. Until people do, the prices won't come down. If input prices remain high, then making steel isn't that profitable. Which means the price of steel really won't come down.
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Guest
Sorry, my assumption was that someone controlled their whole value chain, and wern't dependent on the market. With market prices, I can understand it, but with owning the 4 buildings or so, it looks like a killing per unit (not accounting the per day result due to slower building)
I haven't done such a valuation on many items top to bottom, so I don't even know if steel or any other item is profitable in this way, and steel if VERY dependent on the market, so I wasn't recommending that it was the best item right now by far.
The more I dig (still pretty new) the more I find items that one could come in and change the market short term, but I'm not sure are sustainable long term as a primary product. Thanks for all the responses!
I haven't done such a valuation on many items top to bottom, so I don't even know if steel or any other item is profitable in this way, and steel if VERY dependent on the market, so I wasn't recommending that it was the best item right now by far.
The more I dig (still pretty new) the more I find items that one could come in and change the market short term, but I'm not sure are sustainable long term as a primary product. Thanks for all the responses!
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At the current market prices simple payback period for a 20m2 (retailer level):
a) coal mine in yellow is some 13 days
b) steel factory in red is some 40 days
c) steel factory in green is some 16 days
so steel is expensive because:
a) the raw materials are still very expensive (despite the recent contest-driven additions to capacity)
b) most of production is placed in red which is not cost-effective (too narrow profit margin)
a) coal mine in yellow is some 13 days
b) steel factory in red is some 40 days
c) steel factory in green is some 16 days
so steel is expensive because:
a) the raw materials are still very expensive (despite the recent contest-driven additions to capacity)
b) most of production is placed in red which is not cost-effective (too narrow profit margin)
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Guest
The abovementioned imperfection of the market is caused of course by people that (in most cases unconciously) crosssubsidize steel production by their mines. The actual profit at steel making is very tiny, the actual value is created by the mines.
This will most probably change over time as I expect the prices of raw materials to decline.
This will most probably change over time as I expect the prices of raw materials to decline.
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Guest
I agree that most of the profit in steel is in the raw materials. But I would like to emphasize one point previously mentioned: Supply and Demand. If you are looking for something to make a lot of, then you have to ensure you can quickly sell everything you make. Now I don't know what the trade volume is on the raw materials for steel, but it is very possible that you would have trouble selling large volumes of chemicals, iron ore, and coal at the prices you see them on the marketplace (can anyone comment on this from personal experience?). I personally only buy from there when I need a little extra for my own steel production. This especially seems the case when you consider (as someone mentioned above) that you don't make much profit from steel if you buy all your materials off the market. There are much faster ways to make money.
But, you can always easily find a buyer for your steel, pretty much no matter how much you make. This is mostly because people need lots of steel and they don't want to use their factories to make it themselves. So, in my mind, the only reason the price of steel is so low relative to its raw materials is because of the LLC at 135. I think companies would be willing to pay even more for steel not to have to make it themselves.
I also agree with Knoll that the raw materials are a little overpriced. I think a typical markup I have seen for many products is about 5 to 7 times the cost of production (although this does seem to get smaller for longer production lines). Sometimes the coal and iron are at this range, but I often see them go higher.
I find it interesting how the price of 128 seems to have settled. I guess when you take the 135 you can sell at on the market minus the 10% fee, you get 121.5. Then if you take half way between the two values you get 128.25. To me, its almost like the buyer and seller splitting the 10% fee on the value of 135. Isn't it nice that everyone can share
. I would think that buyers could easily buy steel at 122 and the sellers still come out ahead, but I guess the buyers are also competing with each other for the cheaper steel.
But, you can always easily find a buyer for your steel, pretty much no matter how much you make. This is mostly because people need lots of steel and they don't want to use their factories to make it themselves. So, in my mind, the only reason the price of steel is so low relative to its raw materials is because of the LLC at 135. I think companies would be willing to pay even more for steel not to have to make it themselves.
I also agree with Knoll that the raw materials are a little overpriced. I think a typical markup I have seen for many products is about 5 to 7 times the cost of production (although this does seem to get smaller for longer production lines). Sometimes the coal and iron are at this range, but I often see them go higher.
I find it interesting how the price of 128 seems to have settled. I guess when you take the 135 you can sell at on the market minus the 10% fee, you get 121.5. Then if you take half way between the two values you get 128.25. To me, its almost like the buyer and seller splitting the 10% fee on the value of 135. Isn't it nice that everyone can share
. I would think that buyers could easily buy steel at 122 and the sellers still come out ahead, but I guess the buyers are also competing with each other for the cheaper steel.-
Guest
It seems to come in bursts - there are busy periods and slow ones. And it's possible to get stuck high if the price moves lower - as it recently did. But it's a pretty good volume. I'd estimate about half a million kg/day of coal are moved on the market. Less than that of course for Iron, but it's still pretty flush.PolymerTim wrote:Now I don't know what the trade volume is on the raw materials for steel, but it is very possible that you would have trouble selling large volumes of chemicals, iron ore, and coal at the prices you see them on the marketplace (can anyone comment on this from personal experience?).
That's not counting side deals, which I'm sure are going on.
You said it well. Some buyers have dipped lower, but if you're big enough to have an offer like that then you need what you can get and if sellers are smart, the higher offer will eat up all the opportunities.I find it interesting how the price of 128 seems to have settled. I guess when you take the 135 you can sell at on the market minus the 10% fee, you get 121.5. Then if you take half way between the two values you get 128.25. To me, its almost like the buyer and seller splitting the 10% fee on the value of 135. Isn't it nice that everyone can share . I would think that buyers could easily buy steel at 122 and the sellers still come out ahead, but I guess the buyers are also competing with each other for the cheaper steel.
Someone (I won't say the name) offered up recently his steel at 115. That seems to me to be quite silly. Not just because of the previous cost discussion, but because it's so easy to get more than that. Naturally it was all snatched up way more than he could provide, so it was just a missed opportunity.
That happens a lot, especially in contest products, where someone way undercuts the current offers for no reason. I'm sure they think it will help them sell fast but if the buyers aren't looking yet going cheaper doesn't save you money. Or if someone wants to undercut you, they can do that as well at the lower price. To me it's just lowering the profit for no reason.
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Guest
The one bad thing about the steel industry are the outputs involved.
If you want everything to run smoothly on your own production, you need, at a minimum, three mines, a power plant, and two steel factories.
I think a lot of people overlook that this isn't sometimes economically feasible, because thats actually a lot of invested capital for just one small product line.
If you want to get into the steel industry, don't reset, and don't try to make everything on your own. Make one mine and one factory (or 2 in green. Lower production costs and lower expansion costs), and mine coal. Buy iron, chemicals, and power. This will cut a significant portion of your costs down (by about 40-45) and make it profitable then.
The advantage, is that steel will probably move faster than coal.
Also, steel producers are probably using a mine or two in their production line somewhere, I'm sure. Iron moves, so does coal. But the buyers of coal and iron I do not think are buying both, but one or the other.
They have to.
If you want everything to run smoothly on your own production, you need, at a minimum, three mines, a power plant, and two steel factories.
I think a lot of people overlook that this isn't sometimes economically feasible, because thats actually a lot of invested capital for just one small product line.
If you want to get into the steel industry, don't reset, and don't try to make everything on your own. Make one mine and one factory (or 2 in green. Lower production costs and lower expansion costs), and mine coal. Buy iron, chemicals, and power. This will cut a significant portion of your costs down (by about 40-45) and make it profitable then.
The advantage, is that steel will probably move faster than coal.
Also, steel producers are probably using a mine or two in their production line somewhere, I'm sure. Iron moves, so does coal. But the buyers of coal and iron I do not think are buying both, but one or the other.
They have to.