Client: The client for this project was a steel company sales manager, who was based in the Middle East. The manager had been asked by his Board to expand sales volumes, with special emphasis on profitable export sales. The manager had very little information available to him about local steel markets for his particular products - and had no feeling at all for matters such as transport costs (which can have a large impact on the profitability of export sales). He turned to industry experts MCI for an independent appraisal of the export market opportunities.
Issue: MCI were asked to establish trade volumes and steel export prices for the last 4 years in several local export markets. We were specifically also asked to identify prices and volumes by product segment [i..e. to look at the trade data across different grades and size groups] since the client's production capabilities were restricted to carbon steel products and to particular product dimensions.
Objective: The client's primary objective was to identify a potential target market for an additional 50-100kt of steel sales per annum. In identifying this market, MCI were advised to assess opportunities without undue disruption of local producer sales volumes [to prevent retaliation].
Focus: MCI established import volumes and prices across the relevant market segments in six different countries. Export from the client's home territory was included also, to allow price comparisons [c.i.f. basis] to be made. Historic data were assessed, to check for trends over time. Capex plans were also examined from different database sources, to double check (as far as possible) that competitors' investment plans would not compete with future exports to the selected territories.
Transport cost assessments were also obtained [from capital to capital, covering typical shipment routes and typical loads] in order to factor in approximate transportation costs. The assessments allowed determinations to be made of expected volumes [given a 10% import share] and c.i.f. prices [for the client] that might be achievable in the context of the target 50-100kt export sales objective.
Deliverables: The main deliverable comprised a simple spreadsheet showing the target country, the total historic import volume per annum in the requisite grade / size segment, the achievable share of this trade (10% of volume), the anticipated transport cost per tonne, the expected c.i.f. price relative to the clients' other exports [after transportation] , and the total achievable sales volume. To the extent that 50-100kt sales target could not be met, the analysis allowed determinations to be made of the extent of import penetration required in order to attain the target total export volume.
Contract: MCI typically undertake a project such as this based on a written proposal which is sent to the client prior to project commencement.
The proposal describes the client's objectives, the project scope, the project team [with CVs], the professional fees, the level of expenses (for hotel costs, flights, etc where appropriate), the project timing, the form of deliverable(s) and the payment terms.
Experience: We have undertaken several such projects in carbon steel, covering heavy sections and rail, zinc coated sheet and tinplate across several different territories, but especially in Middle East steel markets.
Other: It is not unusual in some markets to find that national trade statistics are inaccessible or unavailable to nationals and / or to foreigners. In these cases, it is possible to construct a fairly accurate picture of single country trade flows in one direction by adding up trade flows in the opposite direction from all other countries in the world. This follows since for every buyer, there is also a seller. Trade data obtained in this manner is sometimes referred to as 'mirror image' trade data. Getting hold of trade volumes and prices using this approach is a technique that is not uncommon.