Auction Buying Demystified ( part 3 )
An Insider’s Guide to the parlor tricks auctions use to separate you & your money.
In my previous two articles on auction buying secrets, I have exposed the common ways that auction houses get the pigeons to part with their money and actually buy (some of) the junk they are selling. In part three, I’ll discuss some common practices that I have come to rely on that usually drastically increase my chances at paying less and getting more.
Tip #1: The Devil is in the Details
Every auction starts and ends with paperwork. 99% of all of the people at the auction never read the fine print at the bottom of the terms and conditions of bidding at registration time. These terms will lay out ALL of the costs that will be associated with bidding on and purchasing items at this particular auction. Extra expenses that most auctions include that will be tacked on over and above your winning bid prices can include but are not necessary limited to:
- Sales tax (This can be an additional 3 to 13%.)
- Buyers premium (Often 10% to 15% or more)
- Removal fees
- Loading fees
- Security Fees
Many of the details that will affect what you can afford to bid will be determined by what is in those terms and conditions. It’s vital that you think through these details before you even bid as they can greatly increase the cost of the equipment to much more than it’s worth.
Points to think about:
- Is the equipment being auctioned still standing/installed?
Is there a deadline for removal?
- If so, Who will be responsible for the removal?
- If it’s you, the buyer, what will it cost to get it removed?
Can you remove it yourself or must you use a pre-designated removal crew?
- If so – what are the penalties or consequences if it’s not removed within before the deadline?
- Will you lose ownership of the material?
- Will you be fined?
- Will it be removed for you at an exorbitant expense that you will be responsible for?
When, with whom, and how will you remove and/or load the equipment?
- If so – what will they charge?
- Do they have to be certified? Union?
- What expenses will that entail?
Continue reading →
Should you cut your prices to increase sales during a recession?
Let’s Check the Math
FACT:: If you cut prices by 20%, you have to sell 25% more units just to maintain revenue(break even).
During good times, a 25% increase in sales volume is asking a lot. In a recession, the math says it’s self induced suicide for almost all who try.
Continue reading →
I have been watching scrap prices over the past few weeks since Chrysler stopped the auction process which was used to create the prime bundles market pricing. According to Steel Business Briefing’s scrap reporter, with whom I converse on a regular basis (who is a steady reader of the Steel Market Update and calls my newsletter a “must read”); the price of prime scrap has risen by $130 per ton to $885-$900 per ton since June.
Shredded scrap has been moving higher as well and is currently being quoted at $600-$610 per ton and is believed to have room to move even higher as the month progresses due to the wide spread between prime bundles pricing and that of shredded scrap. According to SBB’s sources the expectation is for shredded to go to $620-$640 per ton.
Scrap is used by all mills – whether fully integrated (BOF) or mini (EAF) and a number of mills are reported to be short scrap at the moment.
Higher scrap prices are going to put pressure on the domestic mills to keep prices up and perhaps be used in both contract negotiations as well as spot pricing as a reason for prices to go higher in the future. I am not advocating higher prices just trying to keep you aware of price pressures that may come back on the steel buying consumer at some point in time.
Everyone wants to blame “speculators” on the rising price of oil, steel, iron ore and various other commodities. It is an easy way to explain soaring commodity prices. However, the credit crisis may well be the culprit and the problems may continue to exist to years to come.
The way to get prices down for steel and other commodities is to increase supply relative to demand. Unfortunately, as many large companies already know credit agencies and banks are not willing to take the risks necessary to fund large venture steel and mining projects (thus increasing supply).
Mr. Dan DiMicco,president and CEO of Nucor, brought it home when he told the audience in New York last week, “…the credit agencies have tightened up their sphincters so much that they’re not even willing to talk to the highest-rated investment grade mining and metals company in the world and keep their rating if we borrow $3. So, we are paying the penalties of the bankers on Wall Street and the other banks around the country and rating organizations that were broke and hopefully will be fixed.” Nucor recently had to do a secondary stock offer to raise $2 billion dollars.
If you read my articles last week about the growth of the demand for steel in the world at between 3%-6% meaning as much as 90 million tons of new capacity will be needed each year, then you are aware the need for iron ore, metallurgical coal, coke and other steel making inputs will be necessary. What hasn’t been explained to the steel using community is the devastating affects the credit crunch is having on large companies such as Rio Tinto, BHP Billiton and even more damaging to smaller mining concerns. According to Jeff Christian, managing director of CPM, a New York based commodity advisory firm – “The financing on those mining projects has slowed to a trickle.” He believes at least two years of development work and perhaps as much as five will be lost before the credit crunch is over.
This will keep commodity prices high for years to come.
That will keep steel prices much higher than we can now imagine – for years to come.
Don’t be tricked into believing the current weakness in U.S. prices (mostly related to galvanized) is going to be a long term trend. (Resource: TheStreet.com)