As the title says, there can be two different prices for the same steel product. the reasons are divided into two cases, external factors and internal factors. We will distinguish these two factors and explain them separately
The external factors
As an importer and buyer, it is easy to understand the external factors that cause price differences, such as the following:
1. The difference of loading port
For example, if the vessel shipped from Tianjin port will be more expensive than shipped from Shanghai port, one reason is that the quantity of goods in Tianjin port is less than Shanghai port, and there are fewer vessels accordingly, so the Tianjin port shipping cost is higher.
Another reason is that the distance to other countries from Tianjin port is farther than from Shanghai port. These are the reason why the price is different from different loading ports.
2. The difference of discharging port
This is easier to understand, even though the loading port from China but go to different countries with different distances, so the price of steel will be also different.
3. The difference of quotation time
In fact, the price of steel is changing every day, so official quotations will indicate the validity period, here are two real Events: in the Chinese market, the price of steel was CNY6208 on May 12, 2021, and the price jumped to CNY4626 after 14 days on May 26, 2021, the price of steel was CNY5980 on Oct 11, 2021, and the price jumped to CNY3680 after 38 days on Nov 18, 2021, although the price is fluctuating dramatically, these steels never moved in the warehouse.
4. The different quantities of orders
The same steel will have different transport costs due to the different quantity of order, for example, if a container transport fee is USD 1000, when loaded 28 tons the unit price per ton is $ 35.7, when loaded 20 tons then the unit price per ton is $ 50. This situation also occurs in the road transport of trucks.
The internal factors
Except for the above external factors, let’s talk about the internal factors that buyers may not be clear about, these 3 points are the key factors that really determine the different prices. especially the last points.
1. The different of production processes
Large-scale steel mills have the ability to smelt iron ore to billets with their own equipment and then roll the steel product directly, all processes are done in one plant without interruption, which way saves maximum time and cost, so they are able to achieve a low price.
Small-scale steel mills cannot finish the above way from iron ore to steel products directly and they need external procurement, firstly they need the billets from outside and make secondary heating before the next rolling process, which increases the transportation cost and secondary heating cost, so the steel price will be high.
2. The difference of raw materials
Although the final steel product looks like are the same, actually their raw materials are not the same, the original material of small factories is cheap recycled scrap, melting them directly and then processed into steel products, there is no difference in appearance between these kinds of steel and the steel produced by billets, you will face the trouble when using the recycled material, such as bending rupture, punching hole broken, load-bearing fracture, etc.
Iron ore smelting billet is commercial material with suitable chemical elements and mechanical properties, this kind of steel product’s price will definitely be higher than the price of steel made from recycled scrap. But the difference is not visible in the appearance of the steel.
3. The difference of theoretical weight vs actual weight
The price of steel is divided into theoretical weight and actual weight, and their relationship can be found in another article on theoretical weight vs actual weight.
There is an example that will make it easier to understand why the prices are different: The buyer is planning to make an order of angle bar 50x50x5mm 6 meters length 25 tons. There will be below 2 quotations
| Option 1 By actual weight | |||||||
| goods | size | length | kg/pc | pieces | quantity | unit price | amount |
| Angle bar | 50x50x5mm | 6000mm | 22.6 | 1106 | 25.0 ton | 600 | 15000 |
| Option 2 By theoretical weight | |||||||
| goods | size | length | kg/pc | pieces | quantity | unit price | amount |
| Angle bar | 50x50x5mm | 6000mm | 22.6 | 1106 | 25.0 ton | 540 | 13446 |
which one will you choose to purchase when you see these two prices? it looks like everyone will choose the second option by theoretical weight. Because the first option by actual weight is too expensive!
Why is there a difference of usd1554 in the total value of the same product and the same quantity? The answer is the weight of the piece. This weight can be changed when production, the rolling tolerance became -10% in this order (because the unit price of theoretical weight is less 10% than actual weight). It looks like you pay $1554 less and get the same 25 tons of angle steel, but the second option of 25 tons is calculated by theoretical not its actual weight, do you want to know what the actual weight is in the second option? It is about 22.4 tons by actual weight!
How much in actual weight of the “25 tons” in the option 2 table will be? do you want to know? It is easy to make clear. the total piece is 1106 and know the rolling weight of kg/pc will be ok.
| By actual weight of option 2 | |||||||
| goods | size | length | kg/pc | pieces | quantity | unit price | amount |
| Angle bar | 50x50x5mm | 6000mm | 20.25 | 1106 | 22.4 ton | 600 | 13437.9 |
Check the above table. The weight of the piece is changed to 20.25kg (-10% less) and the total pieces still is 1106. so, the actual weight became 22.4 tons, according to the unit price of option 1, the total amount of goods is $13437.9, almost the same as the total amount of option 2, do you still think the price of option 2 is cheaper?
One more thing, what will be the total amount if I want to buy 25 tons at unit price of option 1 by 20.26kg/pc?
| By actual weight | |||||||
| goods | size | length | kg/pc | pieces | quantity | unit price | amount |
| Angle bar | 50x50x5mm | 6000mm | 20.25 | 1235 | 25.0 ton | 600 | 15000 |
The total actual weight of 25 tons if by 20.25kg/pc and the amount of goods will be $15,000. it seems that the option 2 is cheaper, but please look clearly, the number of pieces has become 1235, there is 129 pieces more than the option 2. In fact, you can treat it as the 129 pieces are the $1554 you paid more than the amount of Option 2.
Such a complicated calculation process makes people dizzy, what I want to tell you is no need to care about the unit price, just focus on the total amount and the weight tolerance, as we have explained in the article on Theoretical Weight vs Actual Weight.
