Traps and tricks when you buy hot rolled steel and cold rolled steel (Part I)

Firstly let's talk about the traps mostly encountered in purchasing hot rolled steel.

1. “Export without paying the tax”. As people know, each order we deal, we pay our government tax, no matter import or export. Product price usually includes the tax, when you separate it, price may seem very attractive, but we MUST know, now this kind of trading is already illegal! Illegal means risk, and risk is the very last thing buyers want to meet in large-volume commodity trading. Some buyers may say it’s your country’s business, there is nothing to do with me. If you think so, you are wrong. When we export, due to the goods is too many to check, our customs will do casual inspection, I believe in every country it’s like this, right? One time or two times maybe several times you could be safe, but it doesn’t mean you can do it all the time. In China we say “How come always walking along the river bank without getting the shoes wet”. Once our customs finds out this situation, the goods will be detained, and that supplier can’t get it back, certainly will not return the money either, so the customer loses the money and the goods.

2.“Delivery with theoretical weight”. It is also understood as delivery with negative thickness tolerance or weight shortage. This situation mostly happens when people buy sheets instead of coils. For example, the client asks for HR sheet with 10mm thickness, but the supplier quotes and supplies with the price of 9mm thickness. Price difference can be 10% or even larger, it’s quite a lot. And when deliver, the quantity should be 100 tons but in fact there are only 90. How to avoid it? Let your supplier quote both prices of coil and sheet. The cost of de-coiling from coil to sheet is about 40-60 RMB/MT, packing, 50-80, and transportation charge from factory to processing center 30-60. So, in total 100-200 RMB could be enough for you to get sheets from coils. But if you get the sheet price is lower than coil price, then obviously there is problem. Theoretical price might be 8-12% lower than actual price, and the tax takes around 7-8% in total price, so, add these two together, there could be 15-20% difference between theoretical price and real effective price. Take an example, if the market price of hot rolled steel is 600 USD/MT, some dishonest suppliers may quote 580 550 even lower than 500 USD.

3.“Pure cheaters and liars”. Since 2021, more and more customers have been cheated, suppliers don’t deliver the goods in a long time after getting the deposit, and don’t return the money; deposit was taken by the supplier and lost contact right away; deliver the goods only with the quantity which the deposit can buy but not the rest; deliver cement in the packing instead of steel coils; deliver second hand tires which are hidden in the packing instead of steel coils; deliver the goods with very poor quality, etc. These situations are difficult to find out, do the background investigation as detailed as you can.

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