Can a Fixed-Price Coil Line Contract Hold for 12 Months?
A coil line quoted at $180,000 in March arrived 11 percent over budget the following February, and the contract called the price firm.
The gap was not a quoting error. Steel plate moved, one container rate rose by more than half, and the drive package was bought in a currency that shifted 6 percent.
None of that is unusual across a nine-month build. A firm price is a negotiation over who carries which risk, not a promise that the risk disappears.
This splits the price into the parts that actually move, prices an escalation clause in dollars, and names the cases where locking the number is the wrong instrument.
Which Cost Lines a Builder Can Actually Hold
A machine price is a bundle of four cost lines, and only one of them sits under the builder's control.
Labour and machining. Design hours, weld time, machining, assembly and testing are fixed once the scope is fixed. This is the part a supplier can genuinely hold for a year.
Fabricated steel. A 1,300 mm line carries 6 to 9 tonnes of plate and section in bases, frames and guards. At $850 a tonne that is $5,000 to $7,700, small enough that most builders absorb it rather than argue.
Bought-in components. Drives, bearings, hydraulics, PLC hardware and the HMI run 35 to 45 percent of the price, and every one is bought on a market the builder does not control.
Freight and site work. Two or three containers, a crane lift, and four to six weeks of installation labour in the buyer's country. This is usually quoted separately, which is where two totals stop being comparable.
The practical consequence is blunt. Ask for the price split into those four lines before anyone argues about the total.
Three Inputs That Move Under a Locked Number
Across a nine-month build, three inputs move enough to matter. Each has a different horizon, so each needs a different hedge.
Steel. Hot-rolled plate and structural section move quarterly. A 12 percent move against a 6 percent steel share costs 0.7 percent of the machine.
Currency. A builder whose cost base sits in one currency and whose quote sits in another carries the gap. A 5 percent move against 40 percent imported content costs 2 percent of the price.
Ocean freight. A 40-foot high-cube from Shanghai to a northern European port has ranged from $1,900 to $9,800 inside a single year, then fallen back again.
Steel and currency are slow enough to absorb. Freight is not, and it is the line most often left out of a fixed-price agreement until the invoice lands.
There is a fourth input that never shows on a quote: the cost of the deposit. A buyer who pays 20 percent at signature and 70 percent at shipment funds the build, and that capital has a price of its own.
Pricing an Escalation Clause in Dollars
Take a $180,000 line on a nine-month build, quoted with freight excluded and steel at 6 percent of the price.
During the build, steel rises 12 percent, the bought-in package rises 4 percent, and the container rate rises 60 percent on a $6,400 freight bill.
Steel contributes 0.06 × 12 = 0.72 percent. Components contribute 0.38 × 4 = 1.52 percent. Freight adds $3,840, which is 2.13 percent of the machine price.
Total exposure comes to 4.4 percent, or roughly $7,900. A buyer who accepts an uncapped index carries all of it. A buyer who insists on a firm number carries none of it on paper.
On paper is the phrase that matters. A builder asked to absorb $7,900 of unknown movement prices the risk in at 2 to 3 percent, and keeps the difference when the market stays flat.
| Arrangement | Who carries the movement | What the buyer gives up |
|---|---|---|
| Firm price, no clause | Builder, on paper | 2 to 3 percent padded into the quote, paid whether steel moves or not |
| Index clause, uncapped | Buyer | Full exposure; a bad year adds 5 to 7 percent after signature |
| Index clause with a 5 percent cap | Shared | Clean number, but the cap is priced at roughly half its value |
| Ex-works, buyer's own freight | Buyer, on freight only | Cheapest if you already ship; a distraction if you do not |
The third row is usually the honest compromise. The cap costs money, and it converts an open-ended risk into a figure a finance team can approve without a second meeting.
The Line Nobody Prices: Queue Position
A firm price with no escalation buys a place in the order book, and the builder chooses the place.
When steel is climbing, a builder holding a firm price has every reason to buy plate late and build late. The delivery date slips and the buyer has no lever, because the price was the only term negotiated.
Ask for the build slot as a week number, and a penalty that starts in the first week of slip rather than after a grace period of thirty days.
Ask as well what happens to the slot if the deposit arrives late. A slot held for a deposit that never lands is a slot the builder will quietly give to someone else.
Is an escalation clause worth drafting below $150,000?
Rarely. The legal cost of a two-way index sits near $1,200 to $2,000, and the exposure on a machine that size is usually smaller than that. Above $300,000 the arithmetic reverses.
How much does a 5 percent cap add to a $180,000 line?
Two to three percent in most quotes, so $3,600 to $5,400. It is real money, and it is still less than an uncapped clause costs in a year when steel runs 15 percent.
How long can a builder hold a price on a 6-tonne fabricated frame?
Six months is realistic when the plate is bought at order. Beyond nine months the honest answer is an index, because no fabricator hedges steel for a single machine.
What deposit secures a build slot on a 9-month build?
Twenty percent is normal and thirty percent buys priority. Below ten percent the slot is provisional, whatever the contract says about delivery.
Habits That Look Protective and Cost More
Three clause habits look protective and are not. Each one trades a visible saving for a cost that appears later.
Paying for a cap on everything. A cap on steel, on currency and on freight at once is three risk premiums stacked. Most buyers only need the cap on the line that is large and volatile.
Accepting an ex-works price to save 4 percent. The saving is real until the first container is booked at spot. On a two-container shipment the freight variance alone can eat the discount.
Tying payments to calendar dates. A milestone payment tied to a date rewards a builder for shipping early and penalises one for shipping well. Tie it to witnessed tests instead.
| Clause habit | What it looks like on the quote | Where it bites later |
|---|---|---|
| Cap on all three inputs | 3 to 5 percent higher total | You paid for protection on two lines that were never going to move much |
| Ex-works to save freight margin | 4 percent lower | Spot rates and demurrage land on your account with no cap |
| Calendar payment milestones | Neutral | Pressure to ship before the run-off test is signed |
| No spare parts price hold | Neutral | Year-two spares priced at whatever the builder's own costs did |
Cases Where a Firm Number Is the Wrong Instrument
Locking a price is not always the strong move. In four situations it produces a worse machine or a worse relationship.
Heavily custom fabrication. A one-off base with 40 percent non-standard plate cannot be hedged by a builder. The padding runs 8 to 12 percent, and the buyer pays it up front for protection they may never use.
Buyers with their own freight and their own rigging crew. Here an ex-works price is strictly better. You already control the volatile line, so paying a builder to cap it is buying insurance twice.
Framework orders across four lines. A two-way index is fairer than a firm number, because the builder's exposure over three years is larger than the margin on any single machine.
Where the comparison itself misleads. Two totals that differ by 6 percent often differ because one includes freight, duty and installation and the other does not.
Normalise the scope before treating the gap as a price difference.
One more boundary is worth stating plainly. No clause protects a buyer from a builder who cannot buy steel at all, and no cap protects a schedule from a foundry that closes for six weeks.
Six Lines to Settle Before Signature
Most disputes trace back to a term that was never written, not to a term that was written badly. These six close the gap.
- Name the base currency and the index source, with the exact publication and the month it is read.
- State what the price includes: freight, duty, unloading, installation, commissioning and operator training.
- Write the escalation formula and the cap as one clause, so the cap cannot be read as an exemption.
- Fix the build slot by week number and attach the slip penalty to it.
- Tie each payment to a witnessed event: run-off test, packing inspection, arrival, commissioning sign-off.
- Hold spare parts prices for 24 months and list the ten parts you will actually consume.
Base dimensions, machine masses and shipping weights for our builds sit in the build sheets for our coil lines, which is the document a freight forwarder needs before a container is booked.
Our coil line knowledge base prices each specification line against landed cost, which is the right frame before any clause is drafted.
Where to go next
A price is only one of six numbers that decide whether a line was a good purchase, and the other five arrive after commissioning.
