You are Natalia Giraldo, commercial director of Metálicos del Valle, a steelmaker in Yumbo, Colombia. Your largest customer demands a 12% price cut and says it can get Chinese steel at 1,820 pesos a kilo. The renegotiation is on Monday 23 February 2026, and before then you must decide what figure Metálicos will take in as the real cost of that alternative.
The situation
Metálicos makes structural sections, rebar and flat sheet in a plant of 320,000 tonnes a year. In 2025 it had revenue of COP 85,000 million and EBITDA of COP 10,200 million, a 12% margin. Rebar, its highest-volume product, sells at 2,240 pesos a kilo; variable cost is 1,860 and the contribution margin 380. A 12% cut would take the price to about 1,971 pesos and that margin to 111.
The customer, Constructora Bogotá Grande (CBG), is one of the country's largest civil-works contractors, with public contracts that require certified materials and penalise delays. It buys 11.76 million kilos a year, COP 26,350 million, 31% of Metálicos' revenue, with three-week delivery and 45-day payment. The annual contract expires on 28 February.
The 1,820 pesos in the letter include neither the tariff nor the transport from the port. Your finance team has gathered the rest: an origin price of 520 dollars a tonne at 3,200 pesos to the dollar, freight of 42 dollars a tonne from Shanghai to Buenaventura, an 8% tariff on the CIF value, 28 pesos a kilo of insurance and customs, and 90 of trucking to Bogotá. There are also costs that appear on no invoice: imports take fourteen weeks against three, so CBG would need eleven more weeks of inventory, financed at 16%; between 3% and 5% of imported material would fail certification, about COP 380 million a year; and each week of delay on a critical project costs CBG COP 280 million in penalties, with an estimated 15% chance of a delay each year.
Metálicos has alternatives too, none of them immediate: three mid-sized builders of about COP 8,400 million a year each, who pay 2% to 4% less and would take six months to absorb the volume, and buyers in Ecuador and Peru at 2,180 pesos a kilo, with a four-month ramp-up. At 6:40 in the evening the finance director stops by your office with the letter printed out: "They say 1,820. We still don't know what it really is."