(10-10-2013, 12:31 PM)NTL Wrote: [ -> ]For projects, will stockists use forward contract pricing to secure a price for steel that will be profitable?
They can only do that when the market is in contango. I am not sure about any enduring competitive advantages in the industry that will enable them to profit in any other situation. Of course, when looking at steel prices on futures exchange, steel to be delivered in Chicago or anywhere might not be the same as steel in Singapore.
Specific to Hupsteel, my suspicion is they don't. The hint comes from the Annual Report. The only hedge they do is on currency.
Thanks Clement and FatBoi for all the enlightenment.
Welcome NTL, I learnt more from trying to answer the questions.
So how will Hupsteel react to replacement cost issues due to rising steel prices?
2010 AR, hupsteel CEO said the following "Hupsteel will also continue to minimize inventory holding, purchasing only to fulfill secured orders and stock up popular common sized items. In this way, it will be protected against fluctuations in steel prices and avoid over utilizing its cash in inventory purchases. This will allow it to take advantage of attractive offers that might arise from time to time and avoid having to keep stock over a long period of time in view of the uncertainty in market demand."
(10-10-2013, 12:55 PM)FatBoi Wrote: [ -> ]Welcome NTL, I learnt more from trying to answer the questions.
So how will Hupsteel react to replacement cost issues due to rising steel prices?
2010 AR, hupsteel CEO said the following "Hupsteel will also continue to minimize inventory holding, purchasing only to fulfill secured orders and stock up popular common sized items. In this way, it will be protected against fluctuations in steel prices and avoid over utilizing its cash in inventory purchases. This will allow it to take advantage of attractive offers that might arise from time to time and avoid having to keep stock over a long period of time in view of the uncertainty in market demand."
It's hard to predict their behavior given they don't seem to hedge their commodity price risk. It depends on whether they purchase their inventory at spot or with a pre-agreed forward contract. Same for sales. Of course it's more complicated than that with trade financing and all that. In general, i think JIT models have little inventory risk but also large cash flow risks in the need to repurchase during rising prices.
Safely said,
Low steel price + Low shipping rates = good for end users
Rising steel price + Rising shipping rates = bad for end users. Which is now.
Will these stockist help their customers to cushion some of the rising costs? Or can simply pass through?
(10-10-2013, 01:45 PM)NTL Wrote: [ -> ]Safely said,
Low steel price + Low shipping rates = good for end users
Rising steel price + Rising shipping rates = bad for end users. Which is now.
Will these stockist help their customers to cushion some of the rising costs? Or can simply pass through?
Hupsteel would need to extract as much as possible out of their inventory. There is no reason for them to help cushion any of the rising costs for any end user as they need to replenish their inventory to continue operations. Their ability to pass the higher costs on will be determined by how the transactions are structured. Some contracts fix delivery dates but not prices.
(18-09-2013, 03:41 PM)brattzz Wrote: [ -> ]More share buy backs..
17 Sept - 200 lots @ 22.3 cts
11 Sept - 200 lots @ 21.5cts
18 Jul - 300 lots @ 22.5cts (they are paying more after XD!!)
17 Jul - 98 lots @ 22.5 cts (they are paying more after XD!!)
11 Jul - 239 lots @ 22.3 cts
5 Jul - 250 lots @ 22.5 cts
4 Jul - 280 lots @ 22.49 cts
9 Oct - 250 lots @ 21.86cts
Hupsteel has the potential to become a super gem, but I am worried about the management as it seems to show that they are unable to make use of their assets well.
I fear that even with the land developments done, they may end up being complacent and the steel business may deteriorate even further.
Vested but worried.
I don't fully understand hupsteel's business model. Why do their clients not source directly from producers? They might be vulnerable to the major steel producers consolidating further downwards into distribution and storage.