Last week my packaging business partner went AWOL and I lost contact for a few days and I had no idea what he was up to. It turns out he had a good reason as he was on the scrounge for raw material and managed to find some from India.
The local raw material supplier being SASOL has just reduced their pricing for this month by 15% and as expected they have no stock. When there is a price increase unsurprisingly they always have stock because they make extra profits. Always without fail when the prices drop they have no supply and this is all intentional and not by mistake or poor forecasting.
The prices have risen by 51% and then another 15% before staying constant and then we had a drop of 8% and now a further drop of 15% so knowing what the exact selling price is rather important. Tonight I will be given all the new costings and then be able to continue dealing with my customers plus more importantly finding new ones. You would look like a proper idiot if you could not give anyone pricing so I would rather hold back and wait until that information has been forwarded.
I am not sure how or where the payment was made for the order of 100 tons, but it was not done locally. He mentioned the hassle of cross border payments and will fill him in on an easier solution when I see him. I know we deal with a lot of cash so I am presuming someone (him) made a trip across the border and a payment was made not using the local FOREX banking system. The time that would have taken to go through the correct channels would have just delayed the entire process and why my post last week with crypto cross border payments is actually rather relevant for every day business.
Just think the risk of taking cash out the country to do a payment is rather insane as this is full of jeopardy. The business needs to continue so the orders have to be fulfilled and only highlights the backward system we are all placed under that is not business friendly. The payment was made as we already have the stock and are using the stock to manufacture this morning. This also says how close we were to running out and guess we had run out late last week and why the trip had to be made.
The price from India on the raw materials is only 12% less so yes you are throwing away 3% of potential profits, but at least you have the raw materials to make the stock. There must be dozens of packaging factories spinning this week trying to find a work around due to SASOL having no stock. Knowing that this out of stock period is intentional who knows when stock will suddenly become available and it is most likely at the end of this month when there is a high possibly prices rise again.
This is the problem when you only have one refinery offering their by products because they are a monopoly controlling the entire market. SASOL call the shots and having once had a 14 day account moved to cash up front prior to orders being accepted so they know they are in control and you have to abide by their rules.
I have not been asking too many questions because this is not my forte of procuring this raw material and my partner knows what we need. I am presuming the Dubai channel is not functioning due to the Straits of Hormuz and the stock that supplier had has been finished. India is in many ways a far easier opportunity and we already have the stock on site and the quality of the raw material is exceptional. The 3% price difference is still a workable margin because at least the business continues to function and the thought of down time is too costly to comprehend for now.
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