The power of a metal pricing syndicate: a lesson from history

Hotline was discussing the Indonesian tin producers’ pricing circle, which broke down late last month, with one third-generation metal man last week.

The internal pressure that generally destroys such arrangements struck a chord for him.

When his father, a steel merchant in the north of England, learned he was joining the industry, he told him a cautionary tale about the likelihood of such syndicates collapsing – and doing so in less than two months, which is roughly how long the Bangka island tin smelters held out for.

His father attended a meeting with a dozen or so of his peers and rivals.

Together they must fight to ensure a fair price for their product.

There was, therefore, grim and unanimous agreement to a proposal that they would not sell any steel for less than £30 per tonne.

Which was all very well.

But as the merchant left the meeting, which was breaking up in ones and twos, he heard a fellow syndicate member talking on a payphone.

“They’re all set on £30. So if we offer now at £29 we should get business done.”

History does not record the merchant’s reaction.

But the pricing ring had not even lasted the night.

Published

December 12, 2011

12:31 GMT

London