Why Are Other Suppliers' Quotes Cheaper?

. Why Are Other Suppliers' Quotes Cheaper?

Price variation is a common market phenomenon. However, in the field of bulk commodities like steel, lower prices often stem from the following reasons, which require careful discernment:

Differences in Product Quality and Standards

• Material and Performance: Whether compliant raw materials are used (e.g., scrap steel vs. molten iron), and whether mechanical properties (yield strength, tensile strength) and chemical composition (e.g., sulfur, phosphorus content) fully meet contractual standards (such as Chinese GB, American ASTM, European EN, etc.). Lower-end products may only achieve borderline compliance or be substandard in key metrics.

• Dimensions and Tolerances: Loose control over dimensional accuracy, fixed lengths, and weight tolerances can significantly reduce costs.

• Surface Treatment and Packaging: Whether anti-rust treatments (e.g., oiling, painting) are adequate and packaging is robust. Inferior packaging lowers transportation and initial outlay costs.

Production Costs and Efficiency

• Production Scale and Process: Large, modern steel mills employing advanced processes (e.g., continuous casting and rolling) have higher yield rates and lower energy consumption, potentially resulting in lower unit costs compared to less efficiently managed smaller mills.

• Raw Material Procurement Costs: Mills with long-term supply agreements or their own mines enjoy more stable and lower raw material costs.

• Quality Control and Management Systems: Strict quality inspection leads to higher rejection rates and costs. Omitting or simplifying these steps can substantially lower prices.

Tax and Financial Maneuvers (High-Risk Area)

• Falsified Invoices/Tax Fraud: This is illegal. Suppliers may obtain VAT invoices through misreporting prices or quantities. Their "low price" may partly stem from eroding state tax revenue. Cooperation with such suppliers carries extremely high legal risks.

• Failure to Provide or Non-Standard Provision of VAT Invoices: If the price is significantly below market rate and the supplier cannot provide sufficient, compliant VAT special invoices (13%), the pricing is likely "unclean." This will cause major issues later with export tax rebates or domestic tax compliance.

Supply Chain Structure and Role

• Direct from Mill vs. Multi-Layer Traders: Direct supply from mills typically offers more competitive prices, but service may be less flexible. After adding their margins, multi-layer traders' prices naturally increase, but they may offer better comprehensive services like financing, assortment, and logistics.

• Stock vs. Futures: Quotes for clearing existing inventory may be lower than for futures requiring production scheduling.