Thursday, August 16, 2012

Mineral prices

There's some buzz on the forums right now regarding mineral prices and a general consensus that it's "wrong" that Scordite is worth more than Bistot. But blaming the market for this is a little silly. Better to examine the causes.

Since there are very, very limited hard, variable  costs associated with mining, it's total cost can be set based on the following

Amortized cost of capital (i.e. what rate of return do I want for my exhumer purchase): This part is trivial given the volume of mining that typically gets done
Cost of crystals (they do decay): This is trivial. Most crystals last a long, long time
Risk cost (what are the odds that I'll need to buy a new exhumer on any given night?)

and then the "where to sell decision" has one other concern:

Transport costs (how much could I have earned by more mining and selling in system vs. transporting to Jita/Amarr/wherever)

I would stipulate that these latter two costs are very, very different in null and hi-sec.

For the larger alliances, mining operations are generally REASONABLY safe. How many Hulk/Mackinaw/Skiff kill mails do you see originating in null-sec? But permanent hulkageddon has really changed the equation for miners. It's also pushed miners into mining missions which tend to be a little bit safer (forcing any hulkageddon pilots to fit a probe which is one less gun in their Catalyst or, more realistically, one less catalyst as someone has to fly the Covert Ops ship).

The other part is the transportation costs. I think that not very much null-sec Tritanium is making it to high-sec markets. Why would I fill up a Jump Freighter with Tritanium (or compressed modules made primarily from Tritanium) when I could fill it up with Mexallon/Isogen/Nocxium, etc? On the other hand, Arkonor, Bistot and Crokite are so prevalent in null-sec (relatively speaking) that there has to be an over-abundance of it that gets shipped regularly to high-sec. By my math, at current prices, a freighter filled with Megacyte is worth about 150billion Isk... The transportation cost is infinitesimal to that. But filled primarily with Tritanium and Pyerite, you're looking at about 1/200th of that (less than 1bill). So why wouldn't I keep it in null-sec and build super-caps with it? Note also, you probably have trouble supplying the raw volume of Trit/Pyerite that you need so your return trip (from dropping off your megacyte) is probably a freighter full of tritanium/pyerite.

In previous times, you had some significant market distortions caused by afk botters mining in significant numbers. There was little risk cost and they strip mined everything. With the bannings and hulkageddons, the number of these people have declined and the economics of their business model no longer work.

So now you're seeing a null-sec driven shortage of low-ends and abundance of high-ends. There's nothing wrong with that... it's just the market at work.


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