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  • Cheap Imports - How???

    Hi all, i'm looking for an explanation, here is my scenario...

    Ornate ironwork - brackets etc. I make these and sell them (or try to at least) Say i use £1.50 worth of steel to make a bracket, materials cost only, no labour, profit, paint, welding etc) I would possibly market it at £6 to £8.

    Now can someone explain how i could go and buy a similar item for 99p?

    And before everyone shouts "because they make lots in one go", even if i made 5000, the steel would still cost me over a pound each, thats not including runnng the machine that makes the 5000, the paint, profit......

    Obviously they are not made in the UK. So can someone explain how this is possible, taking into consideration the following..

    Steel costs,
    Paint or coating,
    Labour,
    Packaging,
    Crating,
    Shipping,
    Import tax/duty,
    Distribution in UK,
    Manufacturers profit,
    Sellers profit,
    The list goes on.

    This is the sort of crap that is killing this country, it just should not be possible to achieve. I have no possibility of competing.

    Another example that happened recently to the company i work for as a main job:- We make and sell greetings cards and craft products, including polypropylene bags which we get custom made in the UK in bulk. Two weeks ago we discovered someone importing and selling to the public for less than we pay at trade cost to get made. This has obviously affected the company that makes them for us and he is now worried about closure, we have lost sales and cant buy as many from him and so on.

    How is it possible to get something into this country for less than what it could be made here for, no way can it be labour costs as the jobs are all low pay. It should no be allowed to happen and should be blocked or heavily taxed at import to make the cost the same as home products to give us a fair chance. Something stinks.

    Sorry for the rant but i would like to know the answer.

    Dave
    If it does'nt fit, hit it.
    https://ddmetalproducts.co.uk
    http://www.davekearley.co.uk

  • #2
    Most recent thing i have heard from a Big builder is that steel prices are unreal.
    China is already exporting steel and other raw materials back to Europe and it should be a matter of time before these prices drop because of laws of economics.
    A small piece of the answer.

    Comment


    • #3
      Originally posted by interiorpainter
      Most recent thing i have heard from a Big builder is that steel prices are unreal.
      China is already exporting steel and other raw materials back to Europe and it should be a matter of time before these prices drop because of laws of economics.
      A small piece of the answer.
      Sorry not going to happen.

      China has just had a 60% increase on castings, yup 60 %
      This will now be passed on and so our steel imports will cost more as will imported goods.

      It's just part of the leveling process.

      I posted a while ago in a thread called "We have never had it so good"

      http://bbs.homeshopmachinist.net/showthread.php?t=27777

      Originally written in September 2007

      Last month our steel suppliers told us they were putting on 27% and in two months time they are going to put on another 32%

      It happened before with Taiwan, cheap goods and then as their standard of living and infrastructure advanced they had to farm out to China, now the same is happening with China.

      There is no answer as it's part of a global leveling process and propping up dead or unproductive companies will cause more harm.

      .
      .

      Sir John , Earl of Bligeport & Sudspumpwater. MBE [ Motor Bike Engineer ] Nottingham England.



      Comment


      • #4
        Dave, as you know I have a small plastics business, and we see exactly the same thing here. Finished product comes in here, landed from China, for a tiny fraction more than we can make the raw plastic parts for.

        And before anyone says 'don't generalise', this is a specific case.
        This product here: http://www.bottlelox.co.uk/ is a product that I spent 3-4 years developing with my customer. The key ideas that make it work and form the basis of the patents are mine, although these ideas were 'given' to their designer who put it into CAD, and whose name is on the patent (sore point, and I may be contesting this..).

        We initially quoted this job, with 7 moulded parts, based on their projection of 1million pa. Costs were extremely tight, with a 5% net margin, and based on getting price breaks for buying large volumes of materials.
        We've never yet done more than 100K pa, yet they were still buying at the 1million price break. After 3 years, we had no choice to put a price increase in - Oil, and naphta/benzene derivatives for plastics had shot up, transport had shot up, cardboard packaging costs had shot up. We passed on these costs alone, and nothing for overhead, margin, or labout increase.
        We put in an 11% overall price incease, which actually only brought it to 2% over the original price break cost for the volumes they were taking.

        So within 3 months of this increase they then went to China for a fully assembled product. This part also has 3 different size stainless coil springs, a torsion spring, a turned stud, a zinc passivated pressing, and EM or AM or an RFID coil, a 40mm long stainless rivet, and needs hand assembly and ultrasonic welding.

        Product from China is landed here for £0.05 more than I can sell the plastic mouldings alone to them, never mind their costs on the other parts and the assembly.

        I don't know how it works either, but yes, it *really* pisses me off too.

        Peter

        Comment


        • #5
          The way it works has several components.

          First: the chinese currency is "pegged" against certain currencies (notably the dollar) in such a way that it is artificially distorted in value. If it were NOT "pegged" , economic factors as they are now would naturally cause it to "float up" and assume a value considerably higher relative to dollars for instance, than it has now. That would drastically change your pricing.

          Second: wages in china have been stupidly low. That affects ALL levels of production. Labor has been so low that it has essentially been "free".

          Remember, a small change in cost at an early stage of production tends to have a much larger effect many levels onwards, as each level generally bases their "profit" on a percentage. So changes tend to be "raised to a power" instead of being merely added on.

          Because the wage rate WAS so small, the cost "at the mine" was low, and every stage after that benefits.

          Third:costs WITHIN a country are almost irrelevant if the country is still communist enough to "direct" activities. it really doesn't cost the state anything to run a train full of coal somewhere, or to dig more coal, or to grow crops. The money hasn't any external reference at that point, and more can be printed if needed. Since there are few "demanding consumers" inflation isn't an issue.

          Fourth: china has had a policy of making it very difficult to buy components of a product externally. You really HAVE to make everything there. In that way, the product has very little 'external cost reference" until it leaves the country. So pricing can be held artificially low ON AN EXTERNAL REFERENCE BASIS. If many components were bought, those costs would be rolled-in and produce an "external reference" for costing at a much earlier point in production.


          In the case of china, they have had such an odd mix of communist and capitalist that they have up to recently not had any proper accounting of many costs.

          Now, wages are going up, affecting all levels, transport costs are going up, and the more recent silly prices paid for steel etc are washing through the system. The wild-eyed capitalists are seeing reality a little better....

          If the system were stable, there would be no way to have sudden 60% price differences. Those reflect the fact that costs have simply never been properly accounted, and that since they are now higher, a proper accounting produces nasty surprises.
          1601

          Keep eye on ball.
          Hashim Khan

          Comment


          • #6
            Hello J Tiers,
            So what you are saying is that Communism is beating Capitalism at it's
            own game ?

            Larry S
            Larry Swearingen
            Fort Wayne, IN
            New Hoosier

            Comment


            • #7
              So what you are saying is that Communism is beating Capitalism at it's
              own game ?
              No, not at all. What is happening is rampant capitalism completely unregulated as it is in the US and most other countries. The Chinese are engaged in some very serious internal price wars and that is largely responsible for the bargain prices seen. They have a long history (before communism) of using price wars as an economic weapon against competitors and have taken up that strategy again. The government is communist in name but the economy is now purely capitalist. Without such restraints as fair trading rules and anti competitive practices or anti-monopoly legislation anything goes.
              Free software for calculating bolt circles and similar: Click Here

              Comment


              • #8
                Hi all, thanks so far. I'm now going to say something, probably stupid, and get shot down for it but here goes.

                As far as i can see, allowing cheap imports does nothing for our businesses and therefor can surely only harm our economy. Why then is it allowed to occur? Can the govt. not tax imports to the level that prices are equal and therefore of no point importing?

                Ok, for something that we are not geared up to produce economically etc then we obviously need to import, but for mundane items that we are more than capable of producing, why does the govt. allow the rug to be ripped from under our feet?

                We used to be a nation of engineers, shipbuilders and so on, our hi-fi equipment was world beating, still can be if you can afford it! but now we are just a warehouse for cheap junk.

                I'm getting in way overhead on my knowledge of this subject but it just rubs me up the wrong way when there are still people who are trying to support the economy by running a business and they just get shafted all the time.

                Dave
                If it does'nt fit, hit it.
                https://ddmetalproducts.co.uk
                http://www.davekearley.co.uk

                Comment


                • #9
                  JTiers has the right of it.

                  In a "command" economy, the government controls prices and wages, with the net result that wages are impossibly low, compared with a "free" economy like we have (at least nominally) in the West.

                  This may seem a silly example, but I think it's illustrative: Last year, I was in South Carolina, and stopped in one of the multitude of "Fireworks" stores. Now the little firecrackers, as far as I know, are still hand-rolled. Here's a shop, about 5,000 miles from where these things are made, selling 500 of them for $1.99 - and at least half of that has to be retailer markup. Then there's shipping, distributor markup, and ultimately, the worker's pay. So you have some poor kid (probably literally, they put them to work early), rolling 500 of these things for a few pence. Machine? Why build a machine? Peasants are cheap, and there's always more of them.

                  Their government doesn't particularly care if the workers are hungry, or that they don't have healthcare. It controls supply and pricing of food to keep them barely alive, but that's all.

                  It's not possible to compete effectively with that kind of system. The only hope is that the Chinese people will become sufficiently capitalised to change their own government. And then Wal-Mart will have to go bankrupt.

                  There IS a second possibility, but I don't think we'll ever see it: Simply stop buying inferior goods from China.
                  Pete in NJ

                  Comment


                  • #10
                    Thanks Pete, all,

                    But why is it allowed to happen? The people that *run* our country[govt] could easily turn round and say, "due to the fact that the product you are trying to import can easily be made in our country, we will have to apply an import tax to ensure that there is no advantage to you importing it and therefore damaging our own busineses"

                    A lot of people over here will not stop buying this junk using the excuse that they cant afford not to, but if it was not allowed in, then they would still have jobs etc and could afford the normal price, i think they are shooting themselves in the foot by supporting the supply of imported rubbish.

                    Some people think i'm an idiot when i tell them that i try quite hard to buy things that are still made here. I am quite proud of the fact when i state that my products are made in England, even to the point of checking where the steel i buy comes from.

                    Dave
                    If it does'nt fit, hit it.
                    https://ddmetalproducts.co.uk
                    http://www.davekearley.co.uk

                    Comment


                    • #11
                      Dave,
                      Where do you end steel may have been made in england but the iron ore has long since stopped being dug here.
                      I long ago gave up on trying to understand so called economics all dictated by accountants as in my opinion if you look at anything in enough detail its just not worth making!

                      Now a little story on the mad economics by accountants, the company I worked in research for was a major consumer of copper and over the years had bought companies that dealt in scrap reclaimation and one in particular recycled old electric motors. The entire facility was run by 8 workers and only consumed gas for 2 days a year when they restarted the furnaces after summer and Christmas shutdowns plus electricity to keep the blowers running.
                      Once the furnace was up to heat simply dropping the motors into the furnace and keeping the air running there was enough exothermic heat from the iron to keep it all upto temperature all they had to do then was add sand to produce a nice flux on the surface. The copper was tapped from the bottom and the slag was run off higher up the side. This slag was also sold as a superb grit blast grit so apart from some fumes up the chimney a very clean form of recycling yet they shut it down because there was no growth in the plant, how short sighted. Now the company is no more.

                      Peter
                      I have tools I don't know how to use!!

                      Comment


                      • #12
                        So what you are saying is that Communism is beating Capitalism at it's own game ?
                        Not at all. Manipulation of currency and monopoly is anti-capitalist. (Monopoly is every capitalist's goal - as long as it is done in the right way I have no problem with this.) However, the Chinese are cheating. One way the prices can stay low is for the government to be subsidizing companies. They sell for below cost and the government gives them enough to 'make a profit.' When all the Western competitors are destroyed, they can stop subsidizing. Japan did this with the power-tools market in the 80s.

                        Simply stop buying inferior goods from China.
                        Their goods aren't inferior for the price. In fact, the quality-to-cost ratio tends to be insane. And there-in lies the problem.

                        Why do we permit China to do this to us? Because we're addicted to inexpensive goods.

                        One way to combat this would be to charge a tariff equal to how much their currency is undervalued. Of course, consumers would be in an uproar when rubber doggie doo costs double.

                        Comment


                        • #13
                          Originally posted by John Stevenson
                          Last month our steel suppliers told us they were putting on 27% and in two months time they are going to put on another 32%
                          I've been steadily stock-piling steel, stainless and cast iron stock in my shop. Sounds like I'd better keep stocking up!
                          "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did."

                          Comment


                          • #14
                            Originally posted by tony ennis
                            the Chinese are cheating. They sell for below cost and the government gives them enough to 'make a profit.' When all the Western competitors are destroyed, they can stop subsidizing.
                            Stop making sense Tony -- you're going to get Tiffie started on another long-winded rant, double-spaced, interspersed with a bunch of random Wikipedia links
                            "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did."

                            Comment


                            • #15
                              Thanks for the invitation.

                              Originally posted by tony ennis
                              the Chinese are cheating. They sell for below cost and the government gives them enough to 'make a profit.' When all the Western competitors are destroyed, they can stop subsidizing.
                              Originally posted by lazlo
                              Stop making sense Tony -- you're going to get Tiffie started on another long-winded rant, double-spaced, interspersed with a bunch of random Wikipedia links
                              Thanks for the nice compliment and "invite" - both of which I accept with alacrity and in the spirit in which they were given.

                              As a start, Australia (OZ) has a booming economy where our Central Bank (Reserve Bank) has increased its rates 12 times in succession (it is now 7%+) with the threat/promise of several more in the offing if we don't pull our heads in and stop the level of Consumer/discretionary spending and get back to a sensible level of expenditure and inflation. The Reserve's target inflation "band" is 2 - 3% and the level here at present is 4+% and slowing. We have chronic shortages of housing and skilled labor and our skilled immigration is sky-high. We have larger tax cuts coming in July - and have had for several years.

                              Not bad huh?

                              And what is it based on?

                              You guessed it - exports of commodities to China, India and Japan, Taiwan, Korea etc. - coal (coking and steaming), iron ore, aluminium ore, copper, natural gas etc. etc. Our main problem is that we can't get it out of the ground, the ports and the country fast enough!!.

                              And as John Stevenson said the price of coal and iron is to go up by 30 to 60% as OZ has the "whip-hand" here and China - quite understandably - is "not happy".

                              That has been going on for years so its not new.

                              Also, our steel made here and sold to the "Trade" and "Retail" is sky-high due to demand and the fact that the main/only steel producer has a monopoly.

                              Forget about import taxes, tariffs and "protection" etc. It nearly sent us broke here as lazy an inefficient manufacturers and producers hid behind those artificial barrier/walls and grew fat and lazy on Government "hand-outs" and "assistance". They "went under" or got "lean and mean" to survive when the tariffs were progressively reduced.

                              Even if China is subsidising its producers, it like any other Government, can only pay that subsidy etc. through revenue/income ie taxation. Same everywhere/anywhere.

                              China's internal costs and standards of living are accelerating as well and the China Stock Exchanges are among the highest (and most volatile) in the world. India is much the same.

                              In spite of all of this we have had a lot of our manufacturing "go under" or "to the wall" and we have "rust-belts" as well.

                              I suspect that the US is going through what much of Europe and the UK and OZ and NZ have gone or are going through.

                              The raw materials etc. for much of the stuff made in both China and locally is produced right here. It can be exported to, manufactured in and imported from China cheaper than our industry can (or will??) sell it here too.

                              So we all have the same problem.

                              In one of many classic cases here, one of our suppliers to the local motor/vehicle industry "went under" because its main customers (2 USA-owned, 2 Japan-owned) could buy the finished articles (right up to the companies Quality Standards) cheaper than the local manufacturer could buy locally made steel from a local steel producer.

                              The newly-elected Government here is looking very seriously at cutting expenditure even though it has very high surpluses - as do most local and State Governments here.

                              OZ and the US have similarities as well:
                              - huge Trade Deficits - mainly with China;
                              - huge levels of personal and corporate debt;
                              - threat of an economic "contraction/recession" (and hopefully not - "depression".

                              China, India, Japan etc. house-hold(ers) are net savers and have huge "nest eggs" "squirreled away" for a "rainy day" - its just part of their culture.

                              China has huge cash reserves in US$ terms and they like the oil-rich states/governments can and does use them to effect as witness the activities of those reserves by China, Russia etc. recently.

                              This sort of corporate action is possibly no worse than those of Hedge Funds etc.

                              Perhaps more should take lessons from Bill Gates and Warren Buffet and the "Orientals" etc. et. al.

                              We wish.

                              Thanks for the invite the lovely party you are having here as I did enjoy it.

                              Sorry, I must go - the "witching hour" is near and my carriage may (re?)turn into a pumpkin and my horses into mice (again) before I get home and get back into my rags and hovel.

                              (Me???!! - as "Cinderella"?? - WOW!!).

                              I can't see any handsome Prince (here????) coming to kiss my foot - but the rest of the world can kiss my ar*e!!!!

                              PS.
                              Originally posted by tony ennis
                              the Chinese are cheating. They sell for below cost and the government gives them enough to 'make a profit.' When all the Western competitors are destroyed, they can stop subsidizing.
                              You will have a hard time convincing me at least that the US and Europe don't subsidize and/or "protect" or "assist" their own "producers" and use their diplomatic/political leverage" to "lean" on "others" to their own advantage. Of course, its in their "national interest" isn't it? And that makes it OK?? Yeah - we do it here too - same reasons too I'd guess.

                              Tony, that is exactly what capitalism and corporations are all about. They (thought they) invented "predatory commercial practices". The "orientals", "Arabs", most of Europe and the Middle-East - and others - have had it down to a fine art for centuries as well. If you want to keep your shirt (and virginity??) - stay out of their Bazaars!!!

                              Thanks for the lovely party.
                              Last edited by oldtiffie; 03-22-2008, 08:30 PM. Reason: Spell-check

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