Originally Posted by
Scrappah
Stopped in at my usual gas station last month. Premium was running about 4.30 / gal. and regular was about 3.20 / gal. There was quite a spread there.
I already knew why, but i commented on it when i went inside to pay. The gal explained that she had bought that load at a certain price and couldn't go any lower without losing money.
I'm seeing something similar going on with scrap. It's a slow time of year and there's more time to network and build friendships with the other scrappers in my area. We all get together and just shoot the breeze for an hour or two every week. There's little or nothing coming in right now so they're hoarding till the price comes back up in the spring.
Wonder if we could take a lesson from the gal at the gas station ?
Commodities have been dropping for awhile now and don't appear to have hit bottom yet. Folks are holding while the value of what they have in stock is dropping daily.
Wouldn't it make more sense to turn-n-burn ? Get that stuff in and out of the shop as fast as possible so that you're not losing money on it ?
"Dollar Cost Averaging" What you pay for the fuel is not what the liquid in the tank cost, it's what your average cost is over a period. If I buy copper at a healthy margin and it drops .20/lb in a day I don't just hold it because it might lose money. I keep selling and buying at an even lower cost. Over time you have an average purchasing cost, and an average selling price and you only hold enough volume cover what you need to get the best price you can. Fuel prices work the same way. If she's over charging for the fuel she may preserve her marginal target, but she's losing business. Slowing down business works if your commodity is extremely cheap or free and so is storage, but not if margins are thin and space is limited like at a gas station. If that is the case you have to keep the inventory moving out and the new product moving in.
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