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The power of a metal pricing syndicate: a lesson from history

Dec 12, 2011 | 07:31 AM |


Hotline was discussing the Indonesian tin producers’ pricing circle, which broke down late last month, with one third-generation metal man last week.

 

The internal pressure that generally destroys such arrangements struck a chord for him.

 

When his father, a steel merchant in the north of England, learned he was joining the industry, he told him a cautionary tale about the likelihood of such syndicates collapsing – and doing so in less than two months, which is roughly how long the Bangka island tin smelters held out for.

 

His father attended a meeting with a dozen or so of his peers and rivals.

 

Together they must fight to ensure a fair price for their product.

 

There was, therefore, grim and unanimous agreement to a proposal that they would not sell any steel for less than £30 per tonne.

 

Which was all very well.

 

But as the merchant left the meeting, which was breaking up in ones and twos, he heard a fellow syndicate member talking on a payphone.

 

“They’re all set on £30. So if we offer now at £29 we should get business done.”

 

History does not record the merchant’s reaction.

 

But the pricing ring had not even lasted the night.




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