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Mining Teddy
School of Applied Knowledge
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Posted - 2008.04.03 18:40:00 -
[1]
So I was looking into t2 caldari ships blueprints. Found out that production was outrageous expensive compared to investments needed etc. Hardly any profit at all. Turns out the bottle neck was price on Ferrogel.
Prices has risen over 200% the last 6 months. Whats the deal ?
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Feng Schui
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Posted - 2008.04.03 18:58:00 -
[2]
Steady supply, rising demand, it shifts the curve upwards.
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Project:Gank
Pilgrim Guide
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Amarr Citizen 155
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Posted - 2008.04.03 19:02:00 -
[3]
yay, another one of these threads.
---------------------------------------------- Why do it the hard way when you can do it the AMARR way. |
Mining Teddy
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Posted - 2008.04.03 19:09:00 -
[4]
I do understand supply and demand,
What I mean is that prices on ferrogel makes t2 production on caldari ships to end in a negative result.
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wamingo
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Posted - 2008.04.03 19:11:00 -
[5]
prices on t2 will just have to go up
-- I won't not promise to avoid refraining from harming you! .... What? |
Shadarle
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Posted - 2008.04.03 19:40:00 -
[6]
Originally by: Mining Teddy I do understand supply and demand,
What I mean is that prices on ferrogel makes t2 production on caldari ships to end in a negative result.
Shhh, don't tell the morons producing these ships that... they are keeping t2 component prices high and T2 ship prices low, if they realize they are morons and are producing below cost they may stop and we wouldn't want that! Plus it would destroy the T2 BPO market if people realized most of them were going to be worth less and less as T2 component prices rose higher and higher. We wouldn't want that. Production must continue!
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Sophie Daigneau
Risky Advanced Production Enterprises GoonSwarm
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Posted - 2008.04.03 19:50:00 -
[7]
Originally by: Shadarle
Originally by: Mining Teddy I do understand supply and demand,
What I mean is that prices on ferrogel makes t2 production on caldari ships to end in a negative result.
Shhh, don't tell the morons producing these ships that... they are keeping t2 component prices high and T2 ship prices low, if they realize they are morons and are producing below cost they may stop and we wouldn't want that! Plus it would destroy the T2 BPO market if people realized most of them were going to be worth less and less as T2 component prices rose higher and higher. We wouldn't want that. Production must continue!
Sorry, but I have to stop you there. Higher material prices will lead to higher sales prices for T2 BPO's as the ME efficiency difference between them and invented BPC's will be amplified.
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Shadarle
LI0NS Industries
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Posted - 2008.04.03 19:54:00 -
[8]
Originally by: Sophie Daigneau
Originally by: Shadarle
Originally by: Mining Teddy I do understand supply and demand,
What I mean is that prices on ferrogel makes t2 production on caldari ships to end in a negative result.
Shhh, don't tell the morons producing these ships that... they are keeping t2 component prices high and T2 ship prices low, if they realize they are morons and are producing below cost they may stop and we wouldn't want that! Plus it would destroy the T2 BPO market if people realized most of them were going to be worth less and less as T2 component prices rose higher and higher. We wouldn't want that. Production must continue!
Sorry, but I have to stop you there. Higher material prices will lead to higher sales prices for T2 BPO's as the ME efficiency difference between them and invented BPC's will be amplified.
You are assuming T2 prices will rise, all evidence to the contrary. Prices on components have doubled or more in many cases and prices have dropped on many T2 modules (a few have gone up, but only by a few percent in most cases). The market takes months to catch up due to the massive over-supply of T2 currently in the pipeline.
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Shakuul
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Posted - 2008.04.03 21:31:00 -
[9]
Edited by: Shakuul on 03/04/2008 21:32:28 Why don't producers just stockpile their product? I mean whats the point in selling it? So they have enough ISK so they can continue to produce goods below cost, which they then sell so they can produce more goods at below cost?
lolwut?
EDIT: I looked at processed material -> T2 component production and that still seems to be positive profit (which of course makes sense since you can recycle components)
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Lo Lightshard
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Posted - 2008.04.04 03:10:00 -
[10]
Originally by: Shadarle Shhh, don't tell the morons producing these ships that... they are keeping t2 component prices high and T2 ship prices low, if they realize they are morons and are producing below cost they may stop and we wouldn't want that! Plus it would destroy the T2 BPO market if people realized most of them were going to be worth less and less as T2 component prices rose higher and higher. We wouldn't want that. Production must continue!
I'll bite.
There is profit in the T2 ship production process, not much in the actual construction of the ship perhaps but in the invention and T2 component production.
Why not just build and sell the T2 components and sell T2 BPCs? Because it's more effort and there is no market for them in the region I produce in. There is for ships though.
Selling T2 ships is easy; reasonable volume, "high" price, "low" competition (skills needed to be able to produce T2 ships -- especially the HICs and T2 battleships -- is a reasonable barrier for non-industrialists).
Shadarle, you are correct there is little to no profit in the ship construction step of this process -- this doesn't invalidate doing it nor warrant the labeling of players that do as morons.
If one step in a multi-step production process breaks even but the process itself is profitable, and it is much more effort to split the process to take out the underperforming step (for the same profit) -- what do you do?
[IMA6E REMOVED] |
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Kwint Sommer
Lothian Quay Industries
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Posted - 2008.04.04 03:49:00 -
[11]
My guess, and this really is a guess as I've never gone into T2 manufacturing, is that the over-all process is still profitable. Sure the actual ship construction is done below cost but when you factor in BPC invention and component construction there is profit.
I've been in a similar position with moon mining. Every once in a while the price of the intermediate stuff ends up being higher than the cost of the finished product. However, I'm making the finished product out of the raw moon minerals and as such I'm still turning a decent profit. Why not sell the intermediate rather than using it to produce the lower value complex stuff? Because it's more work, an interruption to a finely tuned process and there's an extremely limited market for it. So I can either greatly complicate my life for the shot at a bit of extra ISK or I can sell it "below cost" and still make a decent profit.
Purchasing and Shipping Moon Minerals |
Shadarle
LI0NS Industries
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Posted - 2008.04.04 03:54:00 -
[12]
Originally by: Lo Lightshard
Originally by: Shadarle Shhh, don't tell the morons producing these ships that... they are keeping t2 component prices high and T2 ship prices low, if they realize they are morons and are producing below cost they may stop and we wouldn't want that! Plus it would destroy the T2 BPO market if people realized most of them were going to be worth less and less as T2 component prices rose higher and higher. We wouldn't want that. Production must continue!
I'll bite.
There is profit in the T2 ship production process, not much in the actual construction of the ship perhaps but in the invention and T2 component production.
Why not just build and sell the T2 components and sell T2 BPCs? Because it's more effort and there is no market for them in the region I produce in. There is for ships though.
Selling T2 ships is easy; reasonable volume, "high" price, "low" competition (skills needed to be able to produce T2 ships -- especially the HICs and T2 battleships -- is a reasonable barrier for non-industrialists).
Shadarle, you are correct there is little to no profit in the ship construction step of this process -- this doesn't invalidate doing it nor warrant the labeling of players that do as morons.
If one step in a multi-step production process breaks even but the process itself is profitable, and it is much more effort to split the process to take out the underperforming step (for the same profit) -- what do you do?
Saying that producing the ship or not producing the ship costs the same thing is not true. You either A) have the opportunity cost of owning an expensive BPO or B) have to buy the BPC's (or invent them, in which case the opportunity cost of producing with that bpc is the lowest sell price).
So building does induce some costs into the process, perhaps not enough to make it unprofitable for you... but at the same time if the ship is selling for a loss that means the components would sell for more individually, so you could make a greater profit selling them in Jita. Granted this means hauling them to Jita, but with contracts that is a very cheap proposition usually, people haul for piddles these days. But yes, I can see there being a very few rare situations when selling the ship might be easier than selling the individual parts, but this is not the rule it is the exception.
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Lo Lightshard
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Posted - 2008.04.04 04:59:00 -
[13]
Originally by: Shadarle Saying that producing the ship or not producing the ship costs the same thing is not true. You either A) have the opportunity cost of owning an expensive BPO or B) have to buy the BPC's (or invent them, in which case the opportunity cost of producing with that bpc is the lowest sell price).
So building does induce some costs into the process, perhaps not enough to make it unprofitable for you... but at the same time if the ship is selling for a loss that means the components would sell for more individually, so you could make a greater profit selling them in Jita. Granted this means hauling them to Jita, but with contracts that is a very cheap proposition usually, people haul for piddles these days. But yes, I can see there being a very few rare situations when selling the ship might be easier than selling the individual parts, but this is not the rule it is the exception.
I agree, there is an opportunity cost involved in any industrial operation. However, I never made the argument "producing the ship or not producing the ship costs the same".
My point is "even though there is no direct profit realized by building the ship [perhaps a small loss even] this does not necessarily mean that it is invalid to build the ship".
Now, could I pay a hauler to return my finished T2 components 24 jumps to Jita for re-sale? Sure, I still need to tend the orders though.
The only difference between paying a hauler and absorbing some opportunity costs by accepting less profit for a finished ship that I can see is that it is more time effort to involve the hauler; so I build the ship:
hauling costs + value of my time > loss on ship construction
Remeber, I'm not making an overall loss -- profits on the process can be around 40% -- just subsidizing the construction step.
You may be right that my situation is an exception as I am a long way from Jita and I'm prepared to subsidize ships in order to avoid going there every day to stare at sell orders for hours on end.
[IMA6E REMOVED] |
Shadarle
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Posted - 2008.04.04 05:18:00 -
[14]
It's a good point. You're the first person I've seen try to make it, so I tend to think not many people are smart enough to figure that out. Perhaps some do it without really doing the math on it and make a profit in spite of themselves, but I doubt few have worked it out and realize the ship is losing them some money... but it's saving them hassle which makes it worth it in the long run anyhow.
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Tasko Pal
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Posted - 2008.04.04 06:07:00 -
[15]
Originally by: Shadarle It's a good point. You're the first person I've seen try to make it, so I tend to think not many people are smart enough to figure that out. Perhaps some do it without really doing the math on it and make a profit in spite of themselves, but I doubt few have worked it out and realize the ship is losing them some money... but it's saving them hassle which makes it worth it in the long run anyhow.
Yea, a smart person in a MD thread. Don't see that every day. Can we get back to ferrogel now?
BTW, I too am starting to think you're making a move on t2 BPOs with all the mean things you say about them. After all, x10 or x20 annual profit for a fine collectable isn't unreasonable. At least once you have it and want to unload. Before that, it's tripe, not worth the bits it's made of.
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Athanasios Anastasiou
The Illuminati. Triumvirate.
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Posted - 2008.04.04 23:11:00 -
[16]
On a another note, that's a lot of stocked ferrogel being dumped on the market atm.
It will interesting to see how much % of ferrogel are from reaction farms that may shut down for a short while due to low profitability.
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Kwint Sommer
Lothian Quay Industries
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Posted - 2008.04.05 04:19:00 -
[17]
I shutdown my pair of Ferrogel reactors a month ago. Low profitability and high market volatility combined with a personal fear of getting high-sec ganked led me out of the business.
Purchasing and Shipping Moon Minerals |
Shadarle
LI0NS Industries
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Posted - 2008.04.05 17:18:00 -
[18]
Originally by: Tasko Pal
Originally by: Shadarle It's a good point. You're the first person I've seen try to make it, so I tend to think not many people are smart enough to figure that out. Perhaps some do it without really doing the math on it and make a profit in spite of themselves, but I doubt few have worked it out and realize the ship is losing them some money... but it's saving them hassle which makes it worth it in the long run anyhow.
Yea, a smart person in a MD thread. Don't see that every day. Can we get back to ferrogel now?
BTW, I too am starting to think you're making a move on t2 BPOs with all the mean things you say about them. After all, x10 or x20 annual profit for a fine collectable isn't unreasonable. At least once you have it and want to unload. Before that, it's tripe, not worth the bits it's made of.
People keep comparing T2 BPO's to collectibles. The thing is, there are a LOT of them, far too many for them to be truly rare. It's not like there are 20 T2 BPO's in the entire game, there are a massive number over all. Anyone buying it for this reason is not doing it from a profit making point of view.
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SiJira
Imperial Academy
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Posted - 2008.04.05 20:05:00 -
[19]
id like everyone to understand that ferrogel is a great choice for buying and selling and so is dysprosium Trashed sig, Shark was here |
Athanasios Anastasiou
The Illuminati. Triumvirate.
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Posted - 2008.04.16 04:42:00 -
[20]
Doesn't the ferrogel prices look a bit... low? It is now around 4k lower then it was before dyspro jumped from 70k to 100k. I think that reactor farm profits are at a low point atm, so supply has probably decreased.
I expected ferrogel prices to go the way fermionic condensates are going right now, seeing as they both depend on dyspro (Although fermionic condensates are doubly dependent on dyspro).
My theory is that the bunch of resellers who brought the ferrogel before it hit 37k a couple of weeks back have been desperately trying to sell their stock. However, this doesn't make any sense from a trader's perspective. Any thoughts?
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Kylar Renpurs
Dusk Blade
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Posted - 2008.04.16 04:58:00 -
[21]
I'm making the most of it :)
Improve Market Competition! |
Leowen
Industrial Giants
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Posted - 2008.04.16 22:43:00 -
[22]
A few possibilities, limited to a few really as it was such a big sudden drop...
The rise before the fall was steep too. The best bet is a major reactor stopped supplying the market, either intentionally to boost profits, or because of logistical difficulties. It really could be something as simple as the Empire Hauler of a major 0.0 alliance went on holiday and 2-3 weeks supply built up. Then he took it to Jita. Bam.
Otherwise manipulators getting out, for what reason is wide open to speculation.
You're right though the fall was very steep. Someone offloaded in a big way.
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Kylar Renpurs
Dusk Blade
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Posted - 2008.04.16 23:08:00 -
[23]
and I don't think it'll last much longer :)
Improve Market Competition! |
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