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| Sourcing and negotiating dedicated coal supply |
Context / Scope of project
Steel manufacturer was dependent on one supplier for their coal. The steel mill had been built to match the local coal specifications which were unique to the area and there was only one supplier in the country. In addition, 5 years out the current mine would run out and the supplier was suggesting very high costs to bring on a new mine.
PIP was brought in to assist client to think through the options they had and developing a negotiating strategy going forward.
Client achieved:
- Plan for reliable coal supply and strategy for negotiating a win-win outcome for both parties
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What we did:
- Established known and ‘possible’ operating ranges for coal at the plant
- Identified possible alternative coal suppliers which were then put through a range of screen tests and eventual plant trials to determine credible suppliers and the impact of their coal on plant economics
- Established likely economics of alternative coal supplies
- Reverse engineered incumbent supplier’s current and ‘new mine’ costs and capital to supply and hence their profit margins
- Reviewed supply risk of various options
- Looked at other coal customers and options of joint purchasing with them
- Developed final coal sourcing strategy, what each party likely to care most about, desired negotiation outcomes and KPIs
- Developed negotiation workplan for client
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