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Raw material prices continue to rise, but factories are losing money

2021-05-13

For those manufacturers with a short order period (within three months) and fixed prices of downstream products, one of the methods of profit management is to lock the forward prices of raw materials at a suitable point as soon as possible after receiving the order to ensure that they are reasonable. Processing profit. For example: a BOPP manufacturer receives a forward order for delivery in one month, and calculates a processing fee of 2000 yuan/ton according to the current market forward quotation, which can ensure a reasonable production profit. The downstream company can immediately lock in the price of PP raw materials for the corresponding quantity one month later through the form of point-price procurement, thereby locking in the future production profit of the order.

 


However, some manufacturers have a long downstream order cycle, and the excessively high prices of raw materials in the current period have led to loss of orders. For such downstream companies, the ordinary point pricing model often cannot meet their profit management requirements, and more customized raw material price management solutions are needed. Take PVC as an example. For example, a PVC profile manufacturer found that the 3-month forward PVC quotation on the market was too expensive. If the price locks in the cost now, the forward order it has received is at a loss. Assuming that under the current basis price (forward spot price-futures price=120), when the PVC futures price drops to 8600 yuan/ton (corresponding to the forward purchase cost of 8600+120=8720), the company’s forward order will have Considerable profit. In view of this situation, the company can negotiate with Jiayue Property to adopt the following procurement methods: If the PVC futures price is lower than 8600 when it expires in 3 months, the customer purchases at the price of 8600+20=8620; if PVC If the futures price is greater than or equal to 8600, the customer purchases at the futures price +20. It can be seen that under this plan, if the price falls below 8,600, customers can lock in the price of raw materials with considerable profits, and then lock in the profit of order production; if the price fluctuates at a high level or even continue to rise, this plan can also help downstream companies in the basis With a subsidy of 100 yuan/ton, it has a cost advantage over the market and can help reduce losses.


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