In the era of construction rush, the main contractor would like to lock in the price with steel product supplier for steady supply of material throughout the construction period. However, some strategic adopted by some supplier may land themselves in hot soup one day.
There are two separate interviews with steel product suppliers published by The Edge last week. One with executive director of Asia Enterprises, another one is with CEO of HG Metal.
HG Metal pointed out that they don’t want to carry too much inventory for fear of being caught wrong-footed by the volatile prices. In other hand, Asia Enterprise has anticipated an upward trajectory in steel and a limited supply, therefore, the company had early this year sought to increase its inventory level. In short, the company stocks up the steel product now with hope to sell it at higher price when market price surged up.
As Asia Enterprise rightfully pointed out, a sharp downward swing in the price of steel would leave itself with very expensive stock that the company has to sell at low prices.
In view of the volatile nature of steel price, this may be not the risk investors want to take for investment in a steel product supplier. If investors need exposure to future price trend of steel price, there are plenty of choices offered by professional managed fund.
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