Payment Terms, Incoterms, and Lead Times in Ferroalloy Export: A Buyer's Reference
International alloy trade is priced and invoiced in US dollars as the standard practice, and the payment structure of a deal tells you a great deal about how much trust each side is extending. The two workhorses are telegraphic transfer (T/T) and the irrevocable letter of credit (L/C) at sight. With T/T, the common pattern is a deposit — often around thirty percent — paid against order confirmation, with the balance against a copy of the bill of lading or before shipment; the deposit is what secures the production slot, because an alloy order is not a warehouse shelf, it is furnace time. With an L/C at sight, the buyer’s bank commits to pay when compliant documents are presented, which is the structure new relationships and large single orders usually start with, and it is slower and costlier for both sides than T/T but shifts the credit risk onto the banking system. Most long-term supply relationships settle down on deposit-plus-balance T/T, and that transition is itself a signal that the commercial relationship has matured.
The incoterm you choose is really a choice about who manages the logistics and who prices it. FOB — free on board — ends the seller’s responsibility once the cargo is loaded at the export port; the buyer then books and pays the ocean freight and insurance. CIF — cost, insurance and freight — keeps the transport inside the seller’s quote, with the price carrying the freight and an insurance premium plus margin. For a buyer moving volume regularly, FOB frequently works out cheaper because they control the carrier selection and can consolidate shipments; for a buyer who wants one number and one counterparty, CIF is simpler. Either way, risk of loss transfers at the point of delivery the term defines — loaded on board for FOB, delivered to the named destination under the CIF structure — and the contract, not the invoice, is where that boundary should be stated plainly.
Lead time has two very different clocks. A lot the supplier already holds in stock — a common occurrence for the standard grades of ferromanganese, ferrosilicon and metallic silicon — can ship within days to about two weeks of payment terms being settled. A production lot is a different animal: three to six weeks is the working range, covering furnace scheduling, casting, bale or ingot making, assay, documentation and port loading. On top of both clocks sits seasonality, and this is the part buyers most often underweight: the Chinese New Year shutdown removes a large share of export capacity for several weeks each year, and the peak summer steelmaking campaign tightens both furnace slots and shipping space at the same time. A lead time quoted in January carries different risk from the same number quoted in July, and the smart buyer prices that difference in.
The practical response to all three variables is the same one that works in every commodity trade we see: stop buying spot at the worst moment. The steelmakers and foundries who run without alloy-related stoppages usually do not have a magic supplier; they have structure — a standing contract or rolling delivery schedule with written tolerances, a buffer stock of a few days to a couple of weeks of consumption held at or near the mill, and payment terms agreed once rather than renegotiated per lot. That is the pattern behind a lot of the long-term supply relationships we run: the deposit and the delivery schedule are set at contract time, each shipment carries lot-level documentation, and the buffer is what absorbs the season, the port congestion, and the week the furnace schedule slips.
When you put the pieces together, the decision order is predictable. First fix the structure — stock or production, standing or spot — because that sets the lead time. Then fix the incoterm, because that decides who owns logistics and what the price includes. Then fix the payment terms, because that is where your working capital and the supplier’s slot security both live. And in all three, write the boundary conditions down: what happens to a delayed lot, who pays for the insurance claim, what documents close the deal. The ferroalloy trade rewards contracts that answer these questions before the first shipment, and it punishes, reliably and repeatedly, the ones that leave them to the email thread.
