How to Negotiate Better Prices for Steel and Aluminium this Festive Season

The festive season in India is a critical period for businesses across manufacturing, construction, and consumer goods. The surge in demand during this time, driven by festivals such as Navratri, Diwali, Eid and Christmas, often leads to significant price fluctuations in key raw materials like steel and aluminum. 

In recent years, industries like e-commerce, retail, and manufacturing in India have experienced notable spikes in the cost of goods sold (COGS) during periods of peak demand (like the current Diwali season), often leading to a decline in profit margins.

While your long term strategy may consist of overhauling inventory management & sourcing practices or digitizing business processes, a quick fix & a core component of your strategy should be careful planning and strategic procurement to mitigate risks and lock in stable prices for steel and aluminum. 

Part A: Understanding Festive Season Price Fluctuations in Steel and Aluminum Markets

During the festive season, demand for steel and aluminum surges across industries like automotive, construction, and consumer goods manufacturing. This spike often triggers price hikes, but what exactly drives these fluctuations?

Key Drivers of Festive Price Volatility:

• Demand Surge: According to the Ministry of Steel, India’s steel production and consumption data over the last year shows a clear hike in the OND quarter with the festive months of October and December showing a significant spike.

• Global Influences: The global aluminum market has seen sharp fluctuations in recent years due to the energy crisis in Europe, affecting smelting costs. For steel, rising coking coal prices—an essential component in steel production—have led to elevated costs for manufacturers.‍
• Supply Chain Bottlenecks: Port congestion, transportation delays, and labor shortages during this peak season can further exacerbate supply-side issues.

For businesses, understanding these factors is key to developing a proactive strategy that can insulate them from unexpected price surges.

Want to stay ahead of raw material price hikes? Visit BizongoBuy for real-time price tracking and predictable delivery options that help you lock in the best prices before demand spikes.

Part B: Solutions and Counter-Strategies for Business Success This Festive Season

1. Secure Better Pricing Through Bulk Purchasing and Long-Term Supplier Contracts

One proven way to combat price volatility is to bulk purchase or negotiate long-term contracts with suppliers. These strategies can provide price stability, ensuring that your costs don’t skyrocket as demand increases.

Bulk Purchasing Advantages:

• Better Pricing: By buying in bulk, you can secure materials at a lower cost per unit. According to industry studies, businesses can save 5-10% on raw material costs by opting for bulk purchases during off-peak times, right before the festive rush.
• Volume Discounts: Suppliers are often more willing to offer discounts on large orders, and by purchasing early, you protect yourself from any mid-season price hikes caused by supply shortages.

Long-Term Contracts:

• Lock in Prices: Negotiating long-term contracts with suppliers provides businesses with cost predictability, regardless of market fluctuations.
• Reliable Supply: Having an assured supply during a high-demand season ensures you avoid production delays or last-minute price surges.

2. Explore Price Hedging Strategies to Mitigate Risks

Businesses that deal with large quantities of steel and aluminum should consider hedging strategies to protect against price volatility. Hedging allows companies to fix the cost of their raw materials in advance, even as market prices fluctuate.

Effective Hedging Tools:

• Futures Contracts: By entering into futures contracts for steel or aluminum, businesses can lock in a set price, protecting them from sudden price hikes during the festive season. This is particularly useful in sectors like infrastructure and construction, where steel consumption is high.
• Forward Contracts: More flexible than futures, forward contracts can be tailored to your specific needs, providing you with both price stability and the ability to manage cash flow better.
• Options Contracts: Another hedging tool is using options contracts that allow businesses to buy steel or aluminum at a capped price, limiting their exposure to market price increases.

Want to explore hedging options for steel and aluminum? With BizongoBuy, you can secure price stability through smart hedging solutions tailored to your procurement needs. Contact our team today for personalized advice.

3. Negotiation Tips for Securing Favorable Prices

Effective negotiation with suppliers can make a substantial difference in securing the best pricing for raw materials during the festive season. Here are a few tactics that can help:

• Leverage Market Data: Before approaching suppliers, ensure you’re well-versed with current market conditions. Use data on global steel and aluminum prices to strengthen your position in negotiations.
• Offer Forecasted Demand: Suppliers are more likely to offer discounted rates if you can provide a well-forecasted bulk demand. This shows commitment and helps suppliers manage their own inventory better.
• Diversify Your Supplier Base: Avoid putting all your eggs in one basket by working with multiple suppliers. This gives you the flexibility to pivot if one supplier’s prices rise too much. With over 8000 vendors across India, you can check out our BizongoBuy portal to get started today!

Industry Insight:

According to a Supplier Diversity Landscape survey from KPMG (2023), 85% of Fortune 500 Companies Have Supplier Diversity Initiatives in place. This indicates a real, strong commitment among leading businesses to include a wide range of diverse suppliers in their procurement process and create more inclusive supply chains.

Part C: How Bizongo’s Procurement Platform Provides Price Stability Through Strategic Sourcing

At Bizongo, we understand the complexities of navigating the festive season and the price volatility that comes with it. Our procurement platform offers a comprehensive solution to ensure price stability, helping you secure raw materials at the best prices.

BizongoBuy’s Key Features:

• Dynamic Price Tracking: Get real-time updates on steel and aluminum prices from various suppliers, allowing you to act swiftly before prices rise.
• Bulk Buying Discounts: Benefit from our pre-negotiated bulk purchase deals that offer significant cost savings.
• Supplier Management: Easily manage multiple suppliers through our platform, ensuring a steady and uninterrupted supply chain during high-demand periods.

Case Study:

One of our clients, Steel Exchange India, grew their revenue by 9X using BizongoBuy to secure the best price for steel raw materials like bundled scrap, super heavy scrap, and panther shots. By leveraging our platform’s dynamic price tracking and predictable delivery, they were able to avoid the usual demand rush.

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