Question to all (R2) about steel

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Guest

Question to all (R2) about steel

Post by Guest » 31.07.2010, 08:44

ok, so I have people advising me that I shouldn't bother selling steel because nobody wants it.

I have people advising me to sell low quality steel, and not to bother with higher quality because nobody wants it high quality.

I also have people advising that I should sell high quality steel because loads of people want it.

I've also noticed that the marlet is almost empty of steel all the time.

*Is this because nobody makes it to sell? Is it because people buy it before I even get a chance to see it? Is it because every product sold in stores that have anything to do with steel have just been forgotten?

I want to hear all your views. :)

Guest

Post by Guest » 31.07.2010, 09:18

There is BIG demant for Q0 steel for building expanding and there is BIG demant for high quality steel (at right price) for production (wardrobes, electronics, auto parts), but... there is much more profitable products around to make (leather jackets, wardrobes, jewelry, cars, gas). Steel is produced in factories, factories owners usualy choose to produce gas, because gas is easy to make (need only oil and power) and gas make huge profit, also gas demand is huge.

Guest

Post by Guest » 31.07.2010, 13:14

If you go with producing steel, you will lose money unless you get it to a high quality :)

Guest

Post by Guest » 09.08.2010, 08:50

You shouldn't bother selling steel not because nobody wants it (demand is ultra high), but because you can make more money on almost everything else...

If you make everything yourself, steel is becoming better product then stones at contract selling price around 540c. Will someone pay you that price??? If yes, then go ahead. If not, stones are better choice...

Calculation:
Merchant can produce 3.168 stones in 20m2 mine. Total cost (5 power, 1 water and production cost) is 3,42c. You can sell for cca 27. Profit per day is ((27-3,42)*3.168)=74.701c

To make the same daily profit you would have to sell coal for 30,88c, iron ore for 31,06, minerals for 31,22.

If you use these in your steel, you should virtually sell these inputs to you factory for these prices. Otherwise your mining activities are not efficient.
Then you use these inputs to make chemicals and finally steel.

You want your factory to make you at least the same money as mine producing stones. To ensure that you will end up with selling price of steel at 540c...

If you don't produce inputs but buy them for cheaper then these suggested prices, suppliers are dumb and in fact could do better by selling stones then selling these inputs to you...

PS: Quality does not matter. Even the highest quality steel sold for this price would make the final product unprofitable...Everyone would use NPC for 135c instead...

Guest

Post by Guest » 09.08.2010, 09:59

Addition:

Profit from one 20m2 mine in yellow at merchant level is as in post above 74.701c.

Factory of the same size at the same level in red produces 534,65 steel per day.

So to make the same daily profit, you have to make 74.701 / 534,65 = 139,72c profit on each unit of steel. Now start adding all the inputs (coal, iron ore, chemicals, power and production cost) to this number and you get your ideal selling price.

NPC sells at 135c.

You see that steel simply cannot be more profitable then stones.

From accounting point of view you can make profit on steel, from economic point of view you will always lose money on it...

Guest

Post by Guest » 09.08.2010, 14:59

If you can make high anough quality of steel, profit will be pretty good.
There are many people that will pay many caps for a high quality steel.

Guest

Post by Guest » 09.08.2010, 15:17

Depends on your definition of "many caps".

For wardrobes you can get 60 per quality. Wardrobes consists of wood, steel, power and wardrobes research. So for steel you get 60/4 = 15 per quality. If we take 135c as base for Q0 steel, to make steel production better then stones production you will have to sell Q((540-135)/15). That means at least Q27. Probably higher as production cost increases with researched quality...

Till you reach this quality, steel production is economically unreasonable.

One would expect a lot more when making such a complex product...

Of course this is not true when you buy your inputs for low prices from others. But then profit you make is profit these supplier just gave to you by their wrong pricing policy:)

Also I assume that wardrobes producers will split the extra money they get for better quality equally between their suppliers. Which is not the case I think...I haven't seen a fax saying buying steel for 135+15*Q yet...:)

Guest

Post by Guest » 09.08.2010, 15:29

So when compared to some other industries, steel isn't 'the ultimate' profit maker... but there is definately a decent amount of profit to be made, therefor worthwhile.

Players need average quantities for expansion in low quality, and players need fair quantities of highest possible quality for production.
Sounds good for me...

Last time I checked, stones couldn't be used for anything except the occasional expansion.
Steel have an all round demand.

In theory, you could sell a lot more steel in a day than you could stone... since steel is required for expansion and production on a huge range of products... from cars to computers to the dreaded wardrobe...

Thanks for the input guyz

Guest

Post by Guest » 09.08.2010, 16:02

Sure you're right. Demand for steel is high. The same for stones. They are very liquid on the market.

I am not suggesting you should make stones instead of steel.

But steel price is tied down by NPC.
And even high quality steel can be substituted by Q0 from NPC when you want too much for high quality. When there is an inflation (contest that uses building which produce steel inputs -> input prices go up), nobody will accept higher prices of steel because of this. Because they have a choice of purchasing from NPC for constant price.

If you don't want to be a retailer and want to produce intermediates to sell to others, I would personally choose a product nobody can substitute for something else (eg plastic, chemicals, textiles, leather, glass, e-components...- on the other hand side there is a risk there will be lower demand for these)

But it's your decision, if you want to make steel, just go for it. All I tried to say is that there are lots of more profitable businesses in this game...Have fun!!!

Guest

Post by Guest » 09.08.2010, 17:04

stajny wrote:Depends on your definition of "many caps".

For wardrobes you can get 60 per quality. Wardrobes consists of wood, steel, power and wardrobes research. So for steel you get 60/4 = 15 per quality. If we take 135c as base for Q0 steel, to make steel production better then stones production you will have to sell Q((540-135)/15). That means at least Q27. Probably higher as production cost increases with researched quality...

Till you reach this quality, steel production is economically unreasonable.

One would expect a lot more when making such a complex product...

Of course this is not true when you buy your inputs for low prices from others. But then profit you make is profit these supplier just gave to you by their wrong pricing policy:)

Also I assume that wardrobes producers will split the extra money they get for better quality equally between their suppliers. Which is not the case I think...I haven't seen a fax saying buying steel for 135+15*Q yet...:)
The only problem is you have to divide the number for steel by 4 again, because of the amount of quality of steel it takes to get one quality, so the actual benefit to wardrobes economically is 60/4/4 = 3.75. Steel production therefore only becomes profitable at q108.

To the first poster, the problem isn't profit per unit, the problem is profit per m2. Every building can only be expanded to 32767m2, and you can only have 100 buildings in your company, so there is a finite number of m2 your company can have (3,276,700). Because of this, the primary number you want to look for is profit per m2 per day, not profit per unit of material.

For instance, with wardrobes, in a 32767m2 joinery at tycoon level i can produce 26884 wardrobes per day. Each wardrobe costs ~2400 to make. If i make q25 wardrobes (my research is level 100 in this example), then i can sell them for 3500 on r2. Lets say i make 1000 per wardrobe, as it costs something to use that high level research.

26884 x 1000 = 26,884,000 profit per day.

For steel, a green factory produces 43313 steel per day (using the same max size building at the same level).

Even if i were to sell every steel with no expenses (ie, i didn't pay for production, and got literally free iron, chemicals, and coal.) steel would make.

43313 x 135 = 5,847,255. By the way, thats like 1/5. That doesn't include the input costs of steel, but it does include in the input costs of wardrobes.

That is the main reason most companies go with wardrobes. Wardrobes make a ton of money.

Retailing wardrobes, i could even more, as i don't suffer DMR with the size that the buildings are.

Given what i currently sell wardrobes for, in a 32767 building i could sell 32767 wardrobes per day, for a profit of 1000 each.

32767 x 1000 = 32,767,000 profit per day.

I am willing to save you some calculations, so get ready for the knowledge.

As far as profit is concerned, at low levels production is better, at higher levels and building sizes sales are better. Research always helps increase profit (a q120 gas research to a large gas company is worth above 100 billion because of the profit you gain from it), but research helps the most in Wardrobes (which are not profitable with no research).

Here are some of the industries that calculations show are viable...

Wardrobes - approx max possible profit/day using current numbers - ~2.5-3 billion
Pros - High profit, everything to produce is sold by NPC at super low prices
Cons - High inventory costs, low margins (means you have to keep more in your warehouse), high entry costs via research, highest building costs.

Gas - approx max possible profit/day using current numbers - ~2-2.5 billion (1.5-2 billion if you make your own oil)
Pros - High Profit, high margins, low inventory costs (inventory can be kept very small), low building costsm, research is less important
Cons - Difficulty to find an oil supplier often forces gas companies to make their own oil, which reduces the value of your research (selling less gas means research doesn't do as much).


A few more industries are viable, but not as viable as wardrobes and gas

Jewelry (2-3 billion profit/day at max size)
Problem here is gold. No one really makes gold, because gold is terrible profit. The problem is that if you are selling any kind of jewelry, you need ~5 gold suppliers that are your size in order to continue producing at full capacity.

Electronics (TVs) (1.5-2.5 billion profit/day at max size)
The problem with this one is plastic. If you could find a plastic supplier, you could make 3.5 billion per day with TVs, but plastic is extremely hard to come by. Ecomps and Glass in high quality aren't exactily a walk in the park either. Efacts also take double expansion time, which really hurts this business.

Leather Jackets (1.5-2 billion profit/day at max size)
Leather and Textiles are the problem here. The prices of these are getting very high, which is lowering the max profits. The other problem is that textile factories take double expansion time. Last problem here is leather jacket demand can be met fairly easily, ruining profits.

Anyway, just my 2 cents, if anyone has anything to add, go ahead.

Also, you can send me an IGM if you'd like, i can explain just about anything to ya if you need it :).

Thanks,
APCE

Guest

Post by Guest » 09.08.2010, 18:23

You're right with that quality thing. But you have to divide it again by 5 not 4 as you need 5 units of steel to make wardrobe. So making steel makes no sense at all even at high qualities.

In all my calculations I compare everything to stones. Stones are very liquid on market, their price is flat at 26,5 - 27. They need no research etc. So I use them as a minimum profit benchmark for every other product.

I thought recalculating everything to m2 is not necessary. 20m2 mine make x stones, factory make at the same size and level y steel per day.

When you expand them to the max size, mine makes K*x stones, factory makes K*y steel.

But I made a math in kapitools and it seems that K depends on area (green, red, yellow) so it makes sense to recalcute everything for buildings at maximum size (as you will get there sooner or later).

That is what I did in my excel spreadsheet but here I tried to show it in small scale...

I have a benchmark for minimum profitability on each product to filter out products that are simply not worth producing (steel, power, water, etc).

Then I have optimum profit per day for the whole company set at 2Bil. So it is 20M per one building slot per day.this helps me figuring out what should be outsourced and what should I keep in house.

In realm1 I produce cars. They are not a bad product. So far I make car bodies, engines, tires and finally cars. And I sell them in my stores. 2B per day is realistic profit in this industry. Although it is extremely hard to get together all inputs needed and stock value is ultra high.

In realm2 I am making and retailing jackets. Also here high profits are possible but suppliers of leather and textiles are not easy to find. Oversupplying of market can be solved by selling in longer cycles. Fill your stores when supply and average quality is low and average price is high.

In realm1 I tried also jewelery in large scale. Gold became a problem really soon. I tried to buy for fair prices (with power at 0,27 fair price is at least 330c per unit of gold - again compare it to stones). and then there was very little room for profit from production and retail.

And I also tries TVs. Plastics became problem very soon as to make TVs in large scale you need a few large suppliers.

I never tried wardrobes and gas...

My opinion is that price caps in stores are preset to too low value. Some industries have no chance to be even as profitable as simple stones...

Guest

Post by Guest » 09.08.2010, 18:30

I'm not one to have empathy for those issues, such as low profit margin, since I provide all my own resources, and rarely buy anything on the market, or in regular contracts.
It's amazing how much you can save and profit when you're not buying power for 10x it's value... and water for like, 8x it's value.

Been a little slow setting up cars, but I provide ALL the resources for it, from the power to the minerals, to the plastic, to the E-Comps and the tires...
Finished product at the moment is just over 30,000 per unit. you can very rarely buy them off the market for as little as double that... BECAUSE of the resources they buy from contracts and market.

As far as I'm concerned, anyone who says something isn't profitable, it's because they're buying half the resources from other players... Except perhaps advertisements... They really are painful.

Guest

Post by Guest » 09.08.2010, 18:50

No offense but you seem like you haven't read any book about economic theory.
One of the first chapters is about opportunity costs.

When you make your own power, it costs you 0,03c (assuming you make it in red). That is your explicit cost. By using it in your own product you sacrifice 0,23c (0,26 (contract selling price) - 0,03 (production cost)) profit from selling it. This is your implicit cost.

If you produce for yourself, you shold sell it to you for MARKET value, NOT your production cost.

When you sell power from your power plant to your car factory for 0,03, then your power plant is making you no profit...

I wouldn't keep a building that generates me no profit at all...

Maybe if you sell power plant and build another car factory instead, you could make more cars. And thus increasing your overall profit. Even though your costs raise, you can sell more. It is then up to you to make a calculation and decide what is better for you (keeping power plant and costs at low level or increase costs and turnover)...What counts is profit: quantity * (selling price - costs). Costs are only one part of the formula...

Making everything yourself means doing a lot of research, doing a lot of research means having a lot of building slots filed with RCs and RCs generate no profit at all...
Last edited by Guest on 09.08.2010, 19:00, edited 1 time in total.

Guest

Post by Guest » 09.08.2010, 19:00

Heh, you realise, that if enough players listen to you, Kapilands would become powerlands, with nothing but power and wardrobes ever being sold.

I'm guessing you're not a player who is focussed on meeting demand. ;)

Guest

Post by Guest » 09.08.2010, 19:30

If everyone followed economic theory, the biggest companies wouldn't be that big. But it would be possible to buy enough plastic, to buy enough leather etc. People wouldn't bother with producing npc products. Everything would be a lot more expensive except of wardrobes (as they can be made just from npc products) and retailers wouldn't make the most money from the whole production chain.

Everyone would know the true value of their product and wouldn't sell for such a low prices as they do most of the times. So generally everybody would be making +- the same profit from m2 of their buildings (if at the same level).

I think it would be more challenging then.

But that won't happen. It is just a game and everyone have a different definition of word "fun". Someone likes to make their companies efficient and well working, someone likes to sell bread to the poor in green zone...

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