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January 16, 2006

Blogging About Work.

I don’t blog about the day job very much but this little story amuses me.

15 years after the introduction of market based pricing into the Russian (or CIS) economy there are some there who still haven’t really quite grasped it. A couple of times in the past month I’ve been offered a very large shipment of a particular metal. Not huge in volume, just a truckload or so. But huge in terms of the world market, it being perhaps a decade’s worth of material for the global market.

Sort of like turning up and asking someone to buy 500 million tonnes of steel in one transaction. You’d expect there to be a healthy discount to the market price wouldn’t you? You know, there’s storage, financing costs, risks in keeping material for a decade, all those sorts of things.

No, you see, because this is indeed a decade’s worth of material, I’m being asked to pay a higher price, because it’s so strategically important. In fact, it’s so important that I’m being asked to pay at least a 1,000 (yes, that’s right, one thousand) times the usual price.

Seriously, with a straight face, people are asking me to pay $3,900,000,000 US (that’s 3.9 billion US dollars) for less than a truckload of a metal.

They obviously don’t know about the research we’ve done. Showing that a capital investment of around $10 million would provide 5 truckloads a year at around $1 million a truckload in operating costs. For a decade.

Amazing really.

January 16, 2006 in The Low Hanging Fruit Company (BVI) Limited | Permalink

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Comments

Which metal? Palladium?

Tim adds: Naah. A truckload of that stuff is still under half a billion. Peanuts really.

Posted by: Matthew | Jan 16, 2006 10:42:10 AM

This is not so much about Russians' lack of market based pricing, it is a symptom of a far more destructive trait which runs through every aspect of their lives: the complete inability to consider the long term.

Almost everything they do takes into account only the here and now, with barely any consideration for the future. You start talking about 5 trucks a year for a decade, and they'll give you a blank look. After all, in Russia, you could be dead tomorrow.

Posted by: Tim Newman | Jan 16, 2006 10:55:08 AM

"A truckload of that stuff is still under half a billion"

But didn't you say they were charging 1000 times too much? So it's only worth 3.9m on the world market? And that's 10 years of supply. I just can't think of a metal that only has $390,000 worth of output a year.

Tim adds: Oh, there’s several. Down in the rare earths. Ytterbium, lutetium perhaps (might be a little more than that actually, but certainly under $2 million), promethium, where the world market annually is almost certainly zero $ (as there’s only 40 grammes on the planet at any one time). And the one I make my living out of, Sc.

Posted by: Matthew | Jan 16, 2006 11:08:54 AM

Sounds like some geezer is trying to fence you a load of dodgy gear.

Well no-one is seriously going to buy at that price they ask so stuff 'em.

I had a similar experience but with central asian carpets. Some guy in Kz wanted to export some carpets - asking about double what can be bought for wholesale in the UK for $65 a square metre that shops can get on sale or return. Makes one think though - the shop in Edinburgh was making a 1000% mark up!

I think they really do think the streets are paved with gold sometimes...

Posted by: angry_economist | Jan 16, 2006 1:57:22 PM

You aren't toying around with Red Mercury are you?

Tim adds: I’ve been offered it often enough. The thing about red mercury is that it doesn’t do what people tell you it does. Nothing to do with nuclear bombs at all. Somewhere, buried in the archives at The Spectator, is a letter from me explaining exactly what it is. Other than a scam, of course.

Posted by: Tom Reynolds | Jan 16, 2006 2:18:00 PM

I hope he's not, for the sake of his bank balance. As I've said before, red mercury does not exist!

Mind you, I've long harboured suspicions about the true nature of Worstall's unspeakable ends behind the bloggy facade, going so far as to study satellite images of his home in sunny Portugal for signs of electromagnetic railguns, time machines or such..I'm also concerned by his appeals for copies of key telecommunications standards.

Perhaps we ought to form an export control group to monitor his procurements?

Tim adds: Red mercury does exist. It’s a compound sometimes made experimentally in reactors. Lasts about 30 minutes before it decomposes.

But "red mercury that makes nucelar bombs the size of pencils" does not exist.

Hhhm. Export controls? This week, 5 tonnes of master alloy to a bicycle manufacturer in Taiwan, looking for some silicon wafers for chip making and err, a book review in the Telegraph. Exciting life, eh?

Posted by: Alex | Jan 16, 2006 2:27:50 PM

promethium, where the world market annually is almost certainly zero $ (as there’s only 40 grammes on the planet at any one time).

I've got loads of this stuff at home. It started out in the basement, but after a few years it had all bunched together in the loft. We called a man in to have a look and he sucked his teeth, took on a pained expression and said we had promethium rising.

Sorry. That wasn't worthy of a christmas cracker.

Posted by: sortapundit | Jan 16, 2006 4:58:52 PM

Some guy in Kz wanted to export some carpets - asking about double what can be bought for wholesale in the UK for $65 a square metre that shops can get on sale or return.

AFAIK, Kazakhstan restricts the export of its carpets (not sure what kind, presumably silk). Maybe these ones were illegal exports?

Posted by: Tim Newman | Jan 16, 2006 5:02:16 PM

Kz restricts the export of the carpets? news to me! probably relates to antique carpets. They are quite valuable I presume.

Maybe they were illegal exports - however, nothing the rug experts we saw said convinced us that they were anything special or antiquities at all. They were unimpressed and they weren't interested at any price, because they weren't the style they think they could sell (they were Turkoman and Kazakh designs mainly and also mostly man made dyes, not natural dyes which were more sought after apparently). I actually bought a few of the best ones for my house! got a good price as the rug man was desperate.

Posted by: angry_economist | Jan 16, 2006 9:59:51 PM

Kz restricts the export of the carpets? news to me! probably relates to antique carpets. They are quite valuable I presume.

Yeah, I have it on good authority (a Kazakh) that Kazakhstan restricts the export of its handmade silk carpets. I don't think this is just antiques, either. As far as I know, Kyrgyzstan does the same. It's something to do with them not wanting their "national items" being flogged at a huge profit in the West. Or something.

Tim adds: Or, of course, the President’s nephew having the monopoly on doing so.

Posted by: Tim Newman | Jan 17, 2006 7:29:08 AM

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