How to make money when steel sales enter the era of meager profits

At the 6th China Steel Traders Conference, the Ministry of Commerce’s market operation regulation experts pointed out that China’s steel production exceeded 100 million tons in 1996, marking China’s entry into the “buyer market” situation.

What does the "buyer market" mean for steel traders? It means that the market competition is becoming more and more fierce, business is getting harder and harder, making money more and more difficult. It means that the era of meager profits is coming. As the steel bosses say, today's steel trading is not expected to make big money. This era has passed. Now.

In the era of meager profits, the profit model of steel traders needs to be changed, and the traditional operating methods of low absorption, high throw, and earning a difference are incompatible. So how do you make money in today's low-profit era? In this regard, steel trading companies are actively exploring and trying to innovate profit models, and various steel trading companies have come up with their own profit secrets in order to maximize the benefits.

A large trading company's profit secret is called "integrated purchase and marketing." This trading company conducts an innovative business model based on the current changes in the steel industry and its own development. Integrate "purchase" and "sales" into one, and focus on iron and steel production enterprises as their goal to carry out business activities. It also put forward the strategic ideology of “establishing a production service supply chain business system centered on steel mills” and formed a good and close strategic cooperation relationship with steel mills to provide steel, coal, iron fines, scrap steel, iron alloys and other steels to steel mills. Raw materials, through the provision of key raw materials to iron and steel companies, promote their own raw material sales; at the same time, the procurement of steel from steel mills, the formation of closed-loop business, purchase and sales interaction, can not only improve the overall profitability, but also reduce capital occupation and reduce business risks. Using this "integrated purchase and sales", last year the trading company carried out integrated purchases and sales with 20 key steel companies in the country, totaling 26.81 million tons of goods (steel and raw materials), and operating revenue of 53.9 billion yuan, an increase of 39% over the previous year.

Some steel trade enterprises' innovative profit model is to focus on sales and implement the "near-end" marketing model. At present, the profitability of steel trade has shrunk dramatically. One of the reasons is that there are many circulation links and logistics costs are high. For example, steel traders order from steel mills, transport them to their designated warehouses, and then distribute them to intermediate traders. Intermediate traders then transfer to other middlemen, operate 3-5 circulation links, and finally reach end-users. After the profit has been distributed at various levels, it has been running out of stock, and has encountered market volatility, falling prices and operating at a loss. These steel trading companies have moved the center of sales and focus to the most end-of-sales, providing steel directly to direct customers. Some steel trading company's "near-end" marketing, to do so to both steel mills and users, the steel directly from the steel mill, sent to the end user's construction site or designated location, which will reduce the steel transport links This not only speeds up the logistics speed, but also saves logistics costs. Transportation costs and warehouse fees can all be saved. This “near-end” business model must be “set by sales”. It originally signed supply contracts with end-users. Steel traders organized resources for steel mills according to the end user’s ordering contract, and then requested them according to the end-users. Delivery time, quantity, variety, etc., distribution, steel traders in the service for the end-user value-added, itself is also to ensure that the due benefits. This is also a profit secret for steel trade and business innovation under the low-profit era.

"In order to benefit from deep processing and earning income from distribution," this is also a profit secret for some steel trading companies in the era of meager profits. Processing and distribution is to increase the benefits of steel traders. This seems to be a consensus. Many steel traders have proposed to provide customers with distribution processing, but they really want to maximize the benefits through distribution and processing, but also need to make the next effort. . In recent years, many steel traders have been striving for “deep, near, and different” in processing and distribution. “Deep” is the deep processing of steel products to satisfy customer's needs to the greatest extent possible; “near” is close to users and provides one-stop service. Service; "different" is the development of heterogeneous, near-end products, to provide users with similar parts and components products.

In order to realize processing and distribution characterized by “deep, near, and different”, some steel trading companies imported advanced processing equipment from the United States, processed high-frequency welded thin-walled H-beams, and established a modern logistics system for processing and distribution, extending the sales reach to In North China, East China, South China, Northeast China, Southwest China, and Northwest China, the shear processing centers throughout the country have met the needs of different customers and have also increased the value-added service capabilities of the steel trade so that the products are closer to the end market. Steel trade enterprises have changed from simple trade models to comprehensive service models, and their profitability has improved. The home trading company has already provided more than 50 key engineering projects in total, and the physical quantity exceeds 2 million tons. The annual processing volume is increasing year by year. In 2010, a total of 1 million tons of processed steel was provided to end users.

In the era of meager profits, steel traders and businessmen have changed the pattern of buying and selling to compete for "pricing power," which is another profit secret. The domestic steel industry has long been in the “scattered, small, multi, and chaotic” operating environment. The disorderly market competition has continued, and the steel trade companies and steel mills have established a long-term agency agreement for supply and marketing relations, which is in fact a kind of buying. Broken proxy relationship. This “buy-out agent” is a mode in which steel traders use their own funds to sign agreements with steel mills and sell them at market prices after arrival. For steel traders, there is no right to speak on pricing and there is a great market risk. Steel companies often only cooperate with agents with a distribution scale of over a million tons and a good reputation for funds. Small steel trade companies can only get goods from two or even three traffickers and the prices are naturally high. Especially when steel prices are “upside down”, steel traders are not only unprofitable but also cause serious losses. In view of this situation, the steel trade associations or associations in some regions organized steel trades to break the traditional single supply and marketing model and achieve a unified procurement distribution pattern. Some local metal industry associations organized 70 steel trade enterprises to invest hundreds of millions of yuan to establish metal material investment company, which concentrated the funds of steel traders and unified orders from steel mills to win by quantity and obtain low prices from steel mills. Concentrate purchasing power and then distribute it to each company to sell, so that all the profits of the hierarchy are left in their hands.

Steel traders set up large-scale steel trading group companies through Baotuan, insisting on the road of centralized procurement, which will surely greatly increase the pricing power between them and the upstream steel mills, obtain the advantages of bulk low prices from steel mills, and fully realize the steel circulation service type. The transformation of the role of the company, through the integration of the strength of dozens of steel trading companies, to complement each other, Baoqun warm, together to resist market risks, as far as possible to ensure their own benefits. Undoubtedly, this is the secret profit of steel trade enterprises in the low-profit era.