Pig Iron Procurement Risks: How to Avoid Losses from Price Fluctuations

Case Study: The Hidden Risk in Pig Iron Procurement — Losses from Price Fluctuations

Positioning: Real case insights + practical strategies for purchasing managers and trading companies

1. Introduction

Over the past year, pig iron prices have experienced dramatic fluctuations.
Some foundries and trading firms suffered heavy losses after signing long-term fixed-price contracts when market prices later dropped significantly.

This article explores how such “contract hedging losses” happen — and what procurement professionals can learn from them.

2. Case Review: The Costly Lesson of Locking Prices

In early 2024, several foundries in eastern China signed annual pig iron supply contracts at a fixed price, anticipating a continuous rise in raw material costs.
However, within six months, the market price dropped by nearly 20%.

This meant that every ton of pig iron purchased under the contract was about 100–150 USD higher than the prevailing market rate.
With thousands of tons under agreement, the cumulative loss reached millions of yuan.

The suppliers insisted on enforcing the contract terms, while buyers sought renegotiation, citing “market abnormalities.”
Ultimately, the contract had to be fulfilled as signed, leading to direct financial losses and strained supplier relationships.

3. Root Causes Behind the Contract Losses

• Lack of a price fluctuation contingency plan:
  Procurement teams failed to assess price risk scenarios before fixing the annual price.

• No price protection mechanism:
  Contracts lacked clauses such as floating price ranges or renegotiation terms to handle significant market shifts.

• Poor market information flow:
  Decisions were made on outdated or overly optimistic assumptions about pig iron and raw material trends.

These missteps turned what seemed like a secure supply agreement into a major financial burden.

4. How to Avoid Hedging Losses in Pig Iron Procurement

• Establish a real-time price monitoring system:
  Track upstream commodities such as iron ore, coke, and steel scrap to anticipate market trends.

• Use “Price Range Contracts”:
  Set an agreed price corridor — for example, ±5–10% — allowing adjustments when the market deviates from the baseline.

• Include a “Renegotiation Clause”:
  Enable both parties to revisit the price if extreme fluctuations occur beyond a set threshold.

• Adopt short-term lock-in + phased purchasing:
  Instead of committing to full-year volumes, secure smaller lots and adjust quarterly or monthly based on market changes.

In short, locking prices is not the problem — managing volatility is.

5. Conclusion

Contract losses caused by price swings are not inevitable.
They often stem from a lack of dynamic procurement strategy rather than bad luck.

A professional purchasing approach means learning to balance stability with flexibility — locking in costs wisely while preserving the ability to respond to market shifts.

🔗 Contact Us — Secure Your Pig Iron Procurement with Confidence

If your company is purchasing pig iron, negotiating long-term contracts, or assessing supply chain costs, Tiegu Export can help you:

• ✅ Access real-time market insights and pricing analysis

• ✅ Source reliable pig iron suppliers and export offers

• ✅ Design smarter contract clauses to reduce price risk

• ✅ Build flexible purchasing and logistics plans

We work with foundries, steel producers, and international trading firms to ensure stable, secure, and cost-effective pig iron procurement — even in volatile markets.

📩 Visit our product page: Pig Iron Suppliers & Quotes | TieguExport.com
or contact our team for a customized sourcing plan.