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Originally posted by Sdaji:
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We all understand that concept with fruit where the retail buyer wants to buy literally $1-2 worth at a time, the shelf life is short, retail costs are high, etc, but bulk commodities aren't usually so extreme with the disparity. Obviously the same concepts apply but if the spot price is *that* much higher than contract price and it's possible to dump into the spot market in bulk for such multiples of contract prices, surely it becomes tempting to sell into the spot market.
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The apples were to explain why spot prices are so much higher than contract, as was asked. I don't know the quantities being bought at spot prices but a long term contract at $25,000/t would save a lot of time, effort and money over trying to sell smaller quantities sporadically for a higher margin. Imagine trying to simultaneously open up Tonopah and sell Rincon product - much better that Rincon is automated with very little time, effort or money from AGY so they can do likewise elsewhere. It's basically franchising - more revenue for less work, albeit on a smaller margin.
Originally posted by Sdaji:
↑
We all understand that concept with fruit where the retail buyer wants to buy literally $1-2 worth at a time, the shelf life is short, retail costs are high, etc, but bulk commodities aren't usually so extreme with the disparity. Obviously the same concepts apply but if the spot price is *that* much higher than contract price and it's possible to dump into the spot market in bulk for such multiples of contract prices, surely it becomes tempting to sell into the spot market.
Expand
(20min delay)