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Long term contracts on mineral buying/selling from suppliers/manufacturers
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SabotNoob
Doomheim
#1 - 2012-05-14 20:58:04 UTC
I was wondering on how to simplify calculating the cost and profit of things being produced by a manufacturer. With the constant price change of minerals, costs can be a little tedious to calculate. I'm sure there are ways and spreadsheets to make it easier, but I was wondering if there's a market for suppliers to provide minerals at a set price for a period of time to buyers.

For example: A supplier (miner or mining corp.) getting into a contract with a buyer (manufacturer) to sell Tritanium at a fixed price (ex: 3 ISK/unit) for 6 months, exactly 1,000,000 units to be bought once a week during the 6 months at x station. The negotiated price would obviously have to benefit both supplier and buyer at the time.

This would simplify calculating costs for the buyer, and would protect the buyer from sudden jumps in Tritanium prices. Tritanium starts selling for 4 ISK/unit? Too bad miner, you are still obligated to sell to your contractual buyer for 3 ISK/unit until the contract is over. Tritanium drops to 2.00 ISK/unit? Too bad buyer, you still have to buy it from your contractual supplier for 3.00 ISK until the contract ends.

So I suppose it could benefit both supplier and buyer, and protect each other from jumps and dips in prices. It would also give manufacturers a flat cost to calculate with.

Issues:
-No way to enforce this contract, it would be based on trust. Current contract mechanics can't enforce something like this. A party can probably state their contract in the Market forum, and come back to it to spread the word of contractual breech, if one or the other fails to uphold their end, but that's about it.
-Would probably have to be done by large sized mining and manufacturing entities, to be able to absorb large scale losses.

I remember reading something similar in RL, about an oil company that had this type of contract with an airline. The oil company provided a set price for jet fuel at one specific airport, to the airline. When oil prices went through the roof, the airline started sending most of their planes to this airport to refuel, so they could take advantage of the lower contractual price of jet fuel, rather than paying the higher market price at all other airports. This pissed off the oil company, which sued, but lost.

Just wondering if something like this would work in EVE! I'm sure it might already be offered in private, but selling services like this would be interesting.
Orion Wyvernbane
Federal Defense Union
Gallente Federation
#2 - 2012-05-14 21:34:17 UTC
Let me see if I can sum this up...

Variations in mineral prices make life difficult for industrialists.
Wouldn't life be better if some sucker miners could be stuck for the difference?


My thought: if your margins are so thin, stop spamming those items and the price may rise above mineral costs.
VagabondAlt
GoonCorp
Goonswarm Federation
#3 - 2012-05-14 21:36:52 UTC
sure that would be great because you can completely 100% trust me that I'll sell you minerals at below jita buy order prices and I can 100% trust you that you'll buy from me at above jita sell order prices because everyone in this game is ever so trustworthy
Orion Wyvernbane
Federal Defense Union
Gallente Federation
#4 - 2012-05-15 00:52:08 UTC
Suppose that 1000 trit => 1 joystick. 1000 joysticks takes 1 day construction time.
Also, consider these actors: MarketMiner, MarketIndy, ContractMiner, ContractIndy


*********************************
Day 0: Trit @ 3 isk

MarketMiner sells 1M trit @ 3 isk: 3M isk - tax - broker.
ContractMiner sells 1M trit @ 3 isk: 3M isk

MarketIndy and ContractIndy make 1000 joysticks each.

Day 1: Trit @ 3 isk
MarketIndy and ContractIndy each sell 1000 joysticks @ 3k isk + markup for 3M isk + markup - tax - broker. They make their money.

Results:
ContractMiner wins against MarketMiner due to no tax or broker. (1%-2% victory)
Indy's are tied.

*********************************

Day 30: Trit @ 4 isk

MarketMiner sells 1M trit @ 4 isk: 4M isk - tax - broker.
ContractMiner sells 1M trit @ 3 isk : 3M isk

MarketIndy and ContractIndy make 1000 joysticks each.

Day 31:
MarketIndy sells 1000 joysticks @ 4k isk + markup - tax - broker. He makes his money.
ContractIndy sells 1000 joysticks @ 4k isk + markup - tax - broker. Good times! (profit: 1M isk + markup - tax - broker)

Results:
ContractMiner is sad - ContractIndy has robbed him of 1M isk.

*********************************

Day 60: Trit @ 2 isk

MarketMiner sells 1M trit @ 2 isk: 2M isk - tax - broker.
ContractMiner sells 1M trit @ 3 isk : 3M isk

MarketIndy and ContractIndy make 1000 joysticks each.

Day 61:
MarketIndy sells 1000 joysticks @ 2k isk + markup - tax - broker. He makes his money.
ContractIndy stockpiles 1000 joysticks @ 3k isk.

Since ContractIndy can't compete with MarketIndy's price. MarketIndy raises his markup! Also, he uses the extra money he's making to pad his ability to sell joysticks, making even more money.
For ContractIndy, with no incoming money it is questionable if future obligations can be met. Financial death imminent.

*********************************

So what have we learned? Long term mineral contracts either:

1. Have no effect because the price didn't change.
2. Make sad miners who get robbed by industrialists as prices go up.
3. Make industrialists go belly up since they can't compete with the market as prices go down (broken contract when the isk stops flowing).

Short term mineral contracts are win because of avoidance of broker and tax.

*********************************

The scenario where mineral prices climb slowly and consistently over the long term, leads to a bunch of success for lame industrials.

They buy minerals one day, store the minerals in factories, and sell the minerals the next day at a higher price and call that the markup. All they've done is make trader profits on their mineral purchase.

Facing decreasing mineral prices, they start selling smaller and smaller markups until they have no markup left. Then they must either join the miners or halt production, waiting for minerals to rise again.
Vaerah Vahrokha
Vahrokh Consulting
#5 - 2012-05-15 01:05:55 UTC
SabotNoob wrote:


Issues:
-No way to enforce this contract, it would be based on trust. Current contract mechanics can't enforce something like this. A party can probably state their contract in the Market forum, and come back to it to spread the word of contractual breech, if one or the other fails to uphold their end, but that's about it.
-Would probably have to be done by large sized mining and manufacturing entities, to be able to absorb large scale losses.

I remember reading something similar in RL, about an oil company that had this type of contract with an airline.


Forwards (the air company example) or Futures if an exchange could be involved and price would be daily marked to market.

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Alexis Valentyne
Anacorn Contracts Agency
#6 - 2012-05-15 11:30:24 UTC
Have a master page on your spreadsheet where you update prices daily. These prices will then transfer across the sheet and show you exactly what you need and for what cost. Takes 60 seconds a day.

I seem to smell the stench of appeasement in the air.
Invictra Atreides
Toward the Terra
#7 - 2012-05-15 15:06:29 UTC
This might only work on an alliance to corp basis or corp to member basis. Well its a plan that can work and probably has been done many times in EVE.

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