Material price vs. finished product

SeymourDumore · Sep 17, 2012

Guys, there is something bugging me to no end.

Look at this item:
(1) 3/4" PEX x 3/4" Male Sweat Adapter - Crimp Fitting | eBay

I've just bought a bunch of these ( well, similar Wirsbo kind ) at the local supply house for $7.00/apiece.

Then, just for the heck of it looked on E-bay for these and started thinking.
The part is solid brass, not cast. the largest dia measures 1.09" dia and it has a stepped hole going from .625 to .930-ish. OAL is just shy of 2".
That would suggest a raw material being 1 1/8 OD solid stock, 2" long.

Now. The weight of 360 brass is .307 lbs/cu-inch, so the raw material for this part weighs .61 pounds.
Current price of 360 brass ( in small qty's ) is $3.75/pound.
That would put the mat. price for this item to $2.28/piece.

Does anyone have any idea how can this be sold @ the advertised $.99 price semi-retail ( being E-bay and all )

Sure doesn't look like a special deal or anything.....

kustomizingkid · Sep 17, 2012

Material bought overseas of questionable quality in unfathomable quantity to most people... that would be my guess.

sfriedberg · Sep 17, 2012

Well, you can bet the factory isn't buying brass in small quantities. Probably more like multiple ton orders. And almost anyplace that works brass recycles the chips. With brass, unlike steel or aluminum, you can get a very significant fraction of the purchase price back for clean chips. So 1) they aren't paying $3.75/pound, and 2) they aren't paying for a cylinder 1.125x2.

SeymourDumore · Sep 17, 2012

sfriedberg said:
So 1) they aren't paying $3.75/pound, and 2) they aren't paying for a cylinder 1.125x2.

Ok, I get that.
But 1/3 rd of the price of raw material? Can a price break that significant be possible?

Let's assume a Hydromat style machine, cycle times would be in the 'hood of 3-4 secs .... max. So, at that rate let's ignore the cycle time completely and use only the chips
as the profit.
My guesstimation, from the 1.125 x 2" material 30% is the part, 70% is chips.
That would put the material price for the actual part ( once again with the 3.75 figure ) to $.72/part with $1.68 going in the barrel.
Now assume 1/2 price break, so the fitting is now $.36/part.

Would that be the answer?
Sell the product for $.45 to make the beancounters happy and then sell the chips at another rate for the bonus?

Again, I'm just trying to make sense of all this as I have no experience in the wicked high qty commodity stuff.

( Sorry, hit the wrong button and posted before finishing....)

With that thought process, the material @ $1.2 still has to be paid and I just don't see the scrap rates high enough to cover the difference?

S_W_Bausch · Sep 17, 2012

Until you confirm that volume purchases will significantly reduce the shipping charges, those items will cost you $6.14 apiece.

Not that much different from retail.

And the retail price has to factor in shoplifting; those items are easily pocketed, unless they are bagged or carded.

If the seller has a CNC churning them out, there is no middleman, so the seller is doing quite well.

Could be a closeout item, could be the mfgr changed names, and dumped them on the market.

Also, could be selling a mailing list, or expecting to recover the cost of loss-leader PEX by selling you something else, such as a recirculating pump, or the PEX crimp tool.

Guest · Sep 18, 2012

barbter said:
My guess is either bankrupt stock, or more probably China with government subsedised mtl and the shop making them is keeping the swarf for profit.

This. Brass must have went down, last time I was shopping for a large volume of brass it was $3.75 a pound mill direct on 2500 pounds of any round size. The Chinese get brass at a price we can only dream of and are reclaiming the chips. Then one guy is feeding a WWII six spindle Acme and cleaning parts for less than $1 an hour, and making 1,000s a day. Chinese also get government subsidized electricity. We can't compete on jobs like these any more.

SND · Sep 18, 2012

I remember a thread about this long ago, a member mentioned getting a bit over 90% of the price/lb back for the chips when its run on dedicated machines that never see any contamination at all, and run high quantities to make it worth recycling it in large quantity. Proximity to the mill might help too, even more so in china.
So yes, once they get paid from both the part, and the scrapper, they can indeed sell a part for less than initial material cost.

I'm more surprised by the $7.00each you paid, I get that stuff for $2-3 at home depot

With that said there was 2 brass coupling/fittings on my screw compressor to link to the air dryer, factory installed, both cracked all the way through lengthwise. Also had one brass/bronze 3/4" valve the house plumber installed that cracked about 2yrs later and started leaking at the pressure tank thankfully. So yeah... some of it is just junk.

SIM · Sep 18, 2012

Dualkit said:
This. Brass must have went down, last time I was shopping for a large volume of brass it was $3.75 a pound mill direct on 2500 pounds of any round size. The Chinese get brass at a price we can only dream of and are reclaiming the chips. Then one guy is feeding a WWII six spindle Acme and cleaning parts for less than $1 an hour, and making 1,000s a day. Chinese also get government subsidized electricity. We can't compete on jobs like these any more.

Alot of those jobs are just gone...however the market for Specials, Rush and Tighter Specified jobs is still open.

E-bay...parts could have fallen off a truck for all we know. Anything beyond E-Bay cost may just be profit.

Mark McGrath · Sep 18, 2012

SND said:
I remember a thread about this long ago, a member mentioned getting a bit over 90% of the price/lb back for the chips when its run on dedicated machines that never see any contamination at all, and run high quantities to make it worth recycling it in large quantity. Proximity to the mill might help too, even more so in china.
So yes, once they get paid from both the part, and the scrapper, they can indeed sell a part for less than initial material cost.

That is exactly how it works.
These fittings were made in Scotland at one time.Now made in Hungary although the multinational group who makes them has a massive factory in China.
The were once shipped from Scotland to USA.
Obviously probably not the same manufacturer made the one being discussed but you never know,

Limy Sami · Sep 18, 2012

Another way of looking at mass produced NF fittings ;-

Take the nett weight of the finished article, then working from the multi ton buying price of the material work it back from that and see what you get.

Chances are the #s will start to make sense

Radar987 · Sep 18, 2012

Situations like these will never completely make sense to us since so many important details are missing, and nobody's going to come forward with concrete info.

It's a fairly sure bet that the manufacturer is recouping a lot of money from the scrap, but the question is whether they're losing money, breaking even, or possibly making some when it's all said and done. Large companies as well as those that are subsidized are motivated to simply move product and get gross profits to look nice and high. Bean counters value a company based on gross profit rather than net. :nutter:

SeymourDumore · Sep 18, 2012

Ok, so if you guys don't mind I'd like to run with this subject a little more.

Look at this listing:
3/4 Hex Nipple Brass 3/4" NPT we combine ship save U $ | eBay

It is only one of many, but the price is pretty much inline with all other offerings, ranging anywhere from $4 on the low to maybe $8.50 on the high side.
This is actually a close approximation what it would/should cost from the view of a machineshop.
Simple, plain vanilla stuff, drill and thread, done.
Similarly, it is a high volume item, tough perhaps not to the level of the PEX connector above.

Why the discrepancy?

bryan_machine · Sep 18, 2012

I once had a chat with a person who ran a screw machine shop - in the US, I met him at an auto race.

He flat out told me that for some parts with very reliable buyers and very reliable processes, more than 100% of the profit came in the recycling. That's in the US, sometime after the year 2000.

Also, I recall reading in a history of manufacturing that some shop had been the first to use this innovation - sell the parts below material cost but make a profit on the recycling. It was 1899 or 1902 or some such date. And in the US.

Another thing to remember is that for products you buy "at retail" there may very well have been 4 or 8 or more layers of "handling" and each of those layers has to mark up the price to survive. Part of the competitive advantage of a big box store is buying from-the-factory lots direct from the factory, and skipping various intermediate parties. This applies to basically any manufactured product.

Joe788 · Sep 18, 2012

It's just simple dumping. I've got an extremely nice rollaway I bought at Costco. It weighs 800lbs. It cost $800 dollars. You can't even buy 800lbs of steel for $800 dollars, let alone stamp/laser it, brake it, weld it, powder coat it, add 30 something ball bearing slides, and four massive steel/polymer casters. That's after it's shipped halfway across the world, and marked up 15% by Costco.

I could sell all of my parts for less than the material cost too if the US government was supporting my efforts to put my competitors out of business.

Mark McGrath · Sep 18, 2012

SeymourDumore said:
Why the discrepancy?

What a pointless question.It`s two different sellers you are comparing.It`s totally irrelevant to your original post.

Limy Sami · Sep 18, 2012

Joe788 said:
You can't even buy 800lbs of steel for $800 dollars, .

YOU can't, but the big users can! and a lot less, as they can get the slides etc etc for a fraction of the small user price.

Remember, a lot of mass produced consumer goods, aren't priced on cost + profit, they're priced on what the market will stand,....... and the manufacturers are tooled up to knock the stuff out at an eye watering pace.

And it's not only the far east, Think of some of Tony TN36's posts - where he mentions production times down to sub seconds and / or costs to 3 or 4 decimal places of a $

SeymourDumore · Sep 18, 2012

Mark McGrath said:
What a pointless question.It`s two different sellers you are comparing.It`s totally irrelevant to your original post.

Nope, it isnt!

The very same suppliers on E-bay sell the same items for similar prices.
That is to say that Pex connection sells the PEX to 3/4 NPT fitting for $.99, at the same time their price on the 3/4 NPT nipple is over $4/piece in packages of 10.
Material size is pretty much the same, so are the machining aspects.
And for what it's worth, the same differences are seen in local outlets ( Home depot, Lowes etc ).

And for the other replies, these figures are absolutely not closeout prices. They have been around for as long as I know, and you get the same if you call them direct anytime.

Joe788 · Sep 18, 2012

Limy Sami said:
YOU can't, but the big users can! and a lot less, as they can get the slides etc etc for a fraction of the small user price.

I know people who buy upwards of 20 tons per week of steel and iron. It doesn't matter how much you buy, nobody is getting raw material cheap enough to make all of the components that go into that box - let alone make any money on it. Costco has a standard markup of 15%. That means the 800lb box has to made, packaged, and shipped across the world for $695 dollars. It simply isn't happening without subsidies and/or dumping. And Costco isn't a huge volume buyer like a big 3 auto manufacturer either (in the comparison to Tony's work). We're talking about quantities of maybe tens of thousands, not millions.

Limy Sami · Sep 18, 2012

So you're paying $2000 / tonne for sheet steel ?

Mark McGrath · Sep 18, 2012

SeymourDumore said:
Nope, it isnt!

The very same suppliers on E-bay sell the same items for similar prices.
That is to say that Pex connection sells the PEX to 3/4 NPT fitting for $.99, at the same time their price on the 3/4 NPT nipple is over $4/piece in packages of 10.
Material size is pretty much the same, so are the machining aspects.
And for what it's worth, the same differences are seen in local outlets ( Home depot, Lowes etc ).

And for the other replies, these figures are absolutely not closeout prices. They have been around for as long as I know, and you get the same if you call them direct anytime.

Maybe you should have linked to the same two suppliers then instead of two different ones.

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