In the previous section we explained that the buyer needed to take into consideration a number of costs such as dumping, shipping, finance etc. The buyer allowed 34.01 c/kg greasy for these costs.
The buyer of course does not work on single sale lots, and often needs to trade in container loads. Therefore with - say - an average 108 bales per container and an avergae 4.5 bales per lot, the buyer needs to buy approx. 24 lots for each contract/container. The buyer will make profits and losses on each of these single lots, but hopes to make a profit over the 24 lots. As said, in this case the buyer hoped to have an average 34 c/kg margin to cover costs and then to make a 'profit'.
Looking at the more identifiable costs:
Shipping - the lot was shipped to China, in a 20' container. The direct shipping cost was therefore approx. 7 c/kg. Other destinations the costs are significantly higher.
Dumping - dumping costs vary from approx. $20 per bale to $14 per bale, dependent upon the dumping type (undumped, doubles, triples), container size (20' or 40'), terminal fees, AWEX involvement, logistical control etc. In this case the lot had a dumping cost of 12.6 c/kg. In a later section we will provide more details on the role of the wool dump.
Storage, Marking of bales etc. - these are charged by the broker, to the buyer, before the lot arrives at the dump. In the majority of cases storage costs are charged by the broker. In this case costs equated to 8.4 c/kg.
Interest, Finance & GST etc - It is not uncommon for the buyer to be 'exposed' for a least 2 weeks of finance costs. GST 'exposure', credit insurance etc. also apply. Using 7% interest factor. the average cost equated to 3.2 c/kg. In many other terms of trade the costs are signifantly higher.
Adminstration - while difficult to calculate, as it usually a fixed cost, we will use the going contract rate for these services - 3.1 c/kg
Other Costs (profit?) would make up the remaining - 4 c/kg
So we have
- Shipping 7 c/kg
- Dumping 12.6 c/kg
- Storage 7.4 c/kg
- Finance 3.2 c/kg
- Admin 3.1 c/kg
- Other/Profit 4 c/kg
These margins are on the lower side of buying costs. It would appear that they relate to a trade where the buyer got paid once the bales were loaded onto the ship, and were destined for China. In the Buying - Other Trades other type sof contracts terms and costs are discussed.