Important factors influencing on steel pipe price
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Why pipe price is always expensive?
The most frequent comment I heard from my customers is apparently why price is so expensive. As a trader in the past, I have to confess that sometimes I just increased the price to my customers by giving them just plausible explanation to make more profit without reasonable ground.
Thus it is very important for the buyer to have the clear vision to figure out what is the real factors can affect on the pipe price.
What would be the real factors which can influence on pipe price?
1) Internal factors from product spec, grade, size, thickness, quantity
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If you buy rare pipe spec. & grade, there is no regular price table
The pipe price for the general spec. & grade such as ASTM A106 Gr.B or API 5L Gr.B is moving within the certain formula. I guess the price range between top price and bottom price from different mill would be no more than 20~30%.
However if you buy ASTM A335 P91 high pressure boiler tube, this price range between top and bottom price will varies 30~50%. Thus if you purchase this pipe after checking with one manufacturer, the price would be possibly high.
In like manner, if you buy API 5L X70 grade pipe, the price between top and bottom will be much wider than Gr.B pipe. Normally the pipe manufacturers have extra price table for higher grade pipe, they don’t offer just following the price table and offer higher price. Because it is very hard to have knowledge how much is the exact extra price per each grade.
Let me tell you the secret of the extra price for higher grade. Pipe manufacturers are saying the higher grade pipe is much more expensive than normal grade pipe. Actually this is true. Because the raw material steel mill (HR Coil, HR Plate, Billet) also apply the same price policy for higher grade. However many mills are alway trying to take more profit by using this logic and offer much higher price than original cost.
In my case, I have experience I bought X60 pipe at the similar price level of Gr.B pipe. Of course, this is not working every time, but It is also possible if you search the suitable manufacturer at the right moment.
Thus you have to pay attention to multiple offer comparison especially when you buy rare spec. & grade pipe.
Among Size / thickness / Quantity, which one do you think would be the most influential factor on price?
For the above question, what was your answer? Many people will say out diameter size or thickness is the most important. But my answer is quantity. Because when you have huge quantity to purchase, the pipe manufacturer could offer remarkably low price, especially when the manufacturer doesn’t have much in-hand orders. On the contrary, they could offer extremely high price in case your purchase quantity is small.
Of course, out diameter size and thickness are also very important factors on price. But what I meant is that the pipe manufacturer can make strategic decision on offer price seeing your purchase quantity and this logic is quite different from the clear influence by size and thickness.
About out diameter size and thickness, normally the small size less than 2” and large size over 10” have the higher extra price. And the thinner thickness also have much higher extra cost for its low productivity.
2) External factors from raw material, high & low season
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Raw material price and high & low season
If we can exactly expect if the price will go up or down, it would be very easy to make money. Unfortunately there is no such a technic can guess correctly 100%. If someone knows this method, please urgently contact me now.
Although it doesn’t have 100% accuracy, you can refer to the below way just for your own reference. Actually the majority of pipe price comes from raw material and raw material price follows iron ore price and coking coal. Many people knows iron ore is very important index for steel price, but you should also know coking coal price is also very important.
If you see the below HR Coil future price for the last 5 years, the price was hiking from around March, 2016. But iron ore future index was not hiking around those times. During these times, the price driven factor was coking coal price as you can see the graph of coking coal future for last 5 years.
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Mostly summer and autumn is the most busy season in China and Korea. Especially after long holiday of Chinese new year holiday and China’s National Day, the price tend to increase due to accumulated demand during the long holiday. Thus it is not that good to place the order right after long holiday. And normally it is low season from November to December. In this regards, it is possibly you could book the order at a bit lower price during this low season.
Last comments
All these tips are from my last 11 years of experience. Perhaps some people might agree or some people might not agree. If you want to discuss this issue with me, please feel free to contact me. I really enjoy talking about this issue with other people.
And if you have questions about the article, please do not hesitate to contact.
* Email : Kenneth Kim / kenkim@younggap.co