Curb the silicone hype: long-term agreement to supply! Beneficial to both upstream and downstream!
Containment Silicone Hype: Long-term Order Agreement Supply! Beneficial to both upstream and downstream!
On September 19, the “Organic Silicone” public account published an article “ Hype? It’s time to stop! 600,000 tons of monomer production capacity is about to be opened, and the market is about to usher in a big reversal! ” resonated with readers and industry insiders. In the article, when talking about how to create a healthy market environment, “Organic Silicone” pointed out that upstream and downstream companies should establish long-term purchase agreements, ensure stable raw material quality through fair negotiations, and reduce the impact of random small-order purchases on costs and product quality. At present, long-term agreement supply instead of bulk trading is an important means to curb the speculation of silicone.
The sudden rise and fall of the bulk market is not good for everyone. This is a truth that everyone understands. For the upstream, there was a surplus in the past few years and everyone sold it at a loss. At that time, the cost of raw materials in the downstream was very low, but no one took advantage of the upstream. Now that the price of raw materials has skyrocketed, upstream companies have begun to feel a bit wary. Those downstream companies that were not very polite to their suppliers in the past and were out of stock are beginning to feel uncomfortable. Such a sudden rise and fall has forced companies to focus a lot of energy on guarding against prices and betting on trends, which also reduces the amount of money companies spend on customers. , investment in research and development, employees and management.
Why is a long-term order better? Because the price of a long-term order must be negotiated by both parties or multiple parties taking into account cost, profit, demand and other factors. , leaving room for each other to maneuver, which is fair to both parties and easy to implement in the long term. This is certainly much more reasonable than small-scale transactions in which buyers and sellers fight against each other and each party wants to squeeze out the other party when it gains power. Furthermore, long-term machinery is factory-to-factory, which reduces many links and transaction costs will definitely be reduced.
Why are you proposing a long-term silicone order now? Because in the past, the number of products was small, there were not so many choices, and there were not so many quantities, no one realized the significance of this matter. Things are different now. The production and consumption of silicone are increasing, and many small products have become bulk products. After this sharp rise and fall, downstream companies also know that they should respect their suppliers. Upstream companies, especially those in the manufacturing industry, have learned that they should respect their suppliers. Those who strive to expand must also find some stable large customers, so that everyone can sit down and talk with each other.
How to talk about it? First of all, it must be fair. Fairness does not mean equal sharing of interests, but requires a comprehensive consideration of costs, reasonable profits, and quantity. Whoever gains more from the transaction should pay more responsibilities, so that things will get better and better.
Specifically, if the raw material factory and the downstream manufacturer are negotiating the long-term order price of DMC\D4\linear body\basic glue\basic silicone oil and other products, the order price must be taken into consideration. For the raw material costs of an individual enterprise, a cost model can be calculated based on metal silicon, methanol, coal (heat) and per capita income (labor costs), and then substituted into a profit margin that both parties consider “reasonable”, such as 20% or 25 %, you can get a reasonable benchmark price. Then the agreed prices between different customers are calculated based on the purchase volume, billing period, transportation method, etc. Both rules and ugly words��In the front, the seller has a stable supply, the buyer conducts random inspections from time to time, the two parties make regular settlements, and renegotiate when due. Wouldn’t it be better for both parties to focus on how to improve the quality of their products, expand their share, and tap potential!
Of course, under what circumstances can the two sides sit down and talk, it seems that we have to wait for the opportunity, but such opportunities will definitely become more and more in the future.
