Thursday, April 24, 2014

Industry Changes and Effects on Lowsec Capital Production

Industry isn't my strong suit in Eve. I have some skills in it, and used to do some Tech 2 production out of a highsec POS about 3 1/2 years ago. I ended up giving it up because my heart was into looking for pew, and my POS wasted many hours in fuel between jobs. It just wasn't as efficient as it could have been.

With the new changes announced for manufacturing, BNANA's Logistics/Industrial chief (Gothie) mentioned to myself and some of the directors on comms yesterday that our capital production line is likely going to be grinding to a halt this summer. Of course, we're like "What the hell? We just got it up and running a couple months ago!"

I've got some handle on production, as I mentioned, I've done a little of it, but I can't really wrap my head around the numbers. When my own expertise falls a bit short, I do what any sane head of an alliance does, and I drag the guy who knows his shit into a conversation and have him explain it to me.

Military experts are saying lowsec capital manufacturers
should start investing in lubricants instead.
First up, getting into the capital game as a startup manufacturer requires an initial investment of around 14 Billion ISK for the BPOs involved in components and ships. Those BPOs need between 5 and 6 weeks of research each before the manufacturer can even think about building anything with them. As it stands now, this research can be done at a POS while the 14 billion ISK investment stays locked in a station. After the change, these BPOs will need to be actually inside the POS. In highsec, an industrial will have a 24 hour warning before someone can attack and RF his POS. Plenty of time to cancel jobs and get your stuff out.

I shouldn't need to tell you what happens in lowsec when someone finds out your POS is holding several billion ISK in loot, but even this is manageable. With slots going away, BPOs can be researched in a station, likely for a premium, but at least safe, transit aside.

That brings us to the core of the problem. Not even the guys that rode the short yellow bus to school would dare hold a mining op in lowsec. There are relatively safe places to do it in null sec, but where we live? Guaranteed hot drop in 30 minutes or less, MAYBE 60 if you can keep a low enough profile. Every single one of the 101 systems in our war zone is within a single jump from the 3 main Gal Mil capital staging systems, to say nothing of the threats posed by BALEX, Snuffbox, Stealth Wear, Scum, or any other group in the area with a titan and a t3 gang. The other war zone is considerably smaller than ours, and the people living there have bridging titans too.

With no local source of ore and minerals, any materials used in lowsec production need to be shipped in. With the life expectancy of a standard freighter in lowsec measured at about the 5 minute mark, that means jump freighters and fuel. The average dread takes about 1.5 million m3 of minerals to construct. Shipping efficiency is obtained right now through ore compression in modules. Our industrial arm uses 425 mm Railgun I modules mostly, which offer about 30x mineral compression allowing a single JF run to haul in enough materiel for about 5 dreads with some filler minerals to compensate for ratios.

With module reprocessing changes coming, modules can only be reprocessed for 55% of their minerals, which will sound the death knell for module compression when the expansion hits this summer. The good news in this is that ore will then hold a similar compression ratio, so we won't need to worry about making 5 jump freighter runs to build a single dread. The bad news for lowsec is in the new REFINING changes.

This ship is about as vertical as the predicted drop in
lowsec capital manufacturing is likely to be this summer.
Gothie was kind enough to link me a chart explaining the differences in reprocessing. Considering that we can't build caps in highsec, we can ignore any small advantage lowsec may have over highsec in refining, and instead look to null sec as our competition in this market... a place that really isn't any more risky than where we call home, yet will see an 11% advantage in ore processing yield.

An 11% advantage on small ships is really no big deal. On a 2 billion ISK capital hull, 11% is a deal breaker. We're already locked out on Supercap production, but to this point we've at least been able to remain competitive on dreads and carriers. At an 11% disadvantage, lowsec capital manufacturers are just about fucked, GG.

So an upgraded outpost in null will have minerals available 19.9% cheaper than someone that refines in a NPC station, and 11% cheaper than a POS module in Low sec. Which means costs for building capitals that are that much cheaper....
Some say "Yes but upgrading an outpost is expensive!!! It's many billions!!!". To which I call bullshit, when a player with 4 indy toons (something that is at the low end of any half-serious indy guy - I myself have 7) can crank out 60 moros or Naglfar per month, worth 130 billion at today's prices. An 11% cost advantage will simply kill out all low sec capital manufacturers, when frankly the risk of building in low (particularly FW low) is not exactly lower than null... -
Gothie Maulerant, BNANA Logistics/Manufacturing Division
This is exactly the sort of stuff I was talking about during the CSM campaign season. It appears that without lowsec representation on the CSM, no one either on the CSM, or at CCP either realized this would be an issue, or cared, and once again lowsec is getting bent over and shafted while a severe financial advantage is being handed out to sov holding null sec entities. Call me a crazy bitter asshole, but the risk/reward is not computing for me in this scenario.


  1. You are mixing your "cost" and "profit" calculations into eachother inappropriately.

    Isolate each of the steps from each other. You were not mining ore to produce your capitals, but instead buying raw off the market and compressing them.

    The equation goes a little more like this:
    - Miners are going to receive ~20% better yield on ore mined
    - Null logisticians will have an 11% better yield on moving bulk minerals
    - Capital margins for both null and low sec remain the same (trit is trit is trit)

    With mineral costs increasing, and there still being _some_ benefit for producing in lowsec... just that null sec where you have a mining corps feeding you will be "The most efficient"..

    Furthermore, to utilize that "best case", you have to talk about the mining hours required to mine that 160 capitals worth of ore... which you will not be doing as a lowsec producer.

    I agree, lowsec capital producers are going to take it on the chin... but it isn't doomsday... and if you're willing to refactor your tools and operations, I think the capital market will be better than ever for producers going forward

    1. Sir, you may not quite see the profit% & ISK/hour involved, and that skews your reasoning. to get 400K isk/hour on a manufacturing slot (which is more or less what most large scale indys will roughly be shooting for), you need a 14.3% margin when building a Moros. So once you take into account that 11% cost differential.... it's effectively dead. Especially when Goons have quite a bit of space 1 or 2 jumps out of popular low sec capital selling spots (which makes logistics really not that bad, compared to low).

    2. You are calculating margin incorrectly. What do the raw materials cost, and what can you sell the product for. That is profit margin.

      Whether you get compressed ore (which I bet will be at a premium) or deal with mind-numbing raw freight, you still are talking costs in and revenue out.

      With the compression game taking such a big kick in the teeth, I expect that most will quit producing caps all together. Those that remain will most likely settle around that "best lowsec" margin.

  2. What I'm looking at is that if we're buying ore to ship in for building, which is the only real viable way to do it, and they are as well, they're getting 11% more minerals for that same refine cycle and amount of ore than we are. That means 11% less ore needed to be bought to provide the minerals for construction, which will equate to more profit. No one is going to be filling their JFs with trit to build this stuff, it would take over 4 full JFs of minerals for a single dread.

  3. The main problem with nullsec production is the selling part, Honestly, it's too early to say this is gonna completely fuck over lowsec cap production. first, you still need to get the minerals there, if you are compressing ore and then moving it through a jump freighter, that may mean more jumps tahn before, more fuel needed. then you have to factor who you sell it to. if you want to sell it to the open market, you have to move it, which means more fuel costs.

    of course these fuel costs may not add up to 11% of the total value, but you get my point. we still don't know what the teams is going to be, and that may effect production costs significantly.

  4. Funky's right, you're wrong. The benefit to nullsec production from the Minmatar Tier 3 refining bonus comes from importing ore, which as he noted, means I need less than if I were building in lowsec. If, as a builder, I buy from a miner in nullsec, I'm actually (most likely) going to be paying empire rates for those minerals... because anything less means he'd be giving up HIS bonus from the refining upgrade, and why would he do that?

    All that said I wouldn't write it off just yet. There are changes that have yet to be announced.

  5. "If, as a builder, I buy from a miner in nullsec, I'm actually (most likely) going to be paying empire rates for those minerals... because anything less means he'd be giving up HIS bonus from the refining upgrade, and why would he do that?"

    I don't agree 100% with this. It seems like you should differentiate the analysis for the different cases of low-ends and high-ends. Assuming that you are able to obtain plentiful compressed ore for import, the nullsec miner will have to sell low-end minerals to you at a cost that makes his product equally attractive to buying imported ore, meaning all he can add on is the logistics cost of shipping from high to null. Since the low-end minerals are much larger than the low end compressed ores, the majority of profit from the better refining on those should go to the nullsec manufacturer, not the nullsec miner, due to the inequal shipping costs factored into the opportunity costs of each. However, since the high-end minerals offer worthwhile isk/m3 density, this disparity in shipping costs doesn't extend to them, and the nullsec miner should be able to keep most of the bonus from the refining upgrade for the high-ends. If obtaining compressed ore is not trivial, then this no longer holds.

  6. There is one part of the picture which is missing there: The 0-14% production cost mentioned in the dev blog. A lot depends on how it will be implemented.

    Lets say the "grim" scenario from a low sec cap builder takes place: Compressed ore is JF to upgraded minmatar 0.0 stations and "all" dread/carrier building takes place there, effectively eliminating profit from building anywhere else. In that scenario, I would expect said system with an upgraded 0.0 station to incur a high % of build cost, perhaps >10% on the base item. This would effectively neutralize the huge advantage in refining with a significant added cost in building, making other systems viable as building systems again.

    What would the indy with access to an upgraded minmatar station do as a counter to that, in order to keep his advantages refine yield:
    -Move the minerals to less busy next door system and build there to lower the added build cost? Sure, but that adds some risk again
    -Build at a POS? Yes, and this is where the actual implementation of the added cost becomes EXTREMELY important. If building at a POS isn't affected by "flock to over-saturated solar systems"-drawback, my argument collapses, and the future is indeed grim.

    I hope build-saturated systems will affect the build cost @ POSes, but only CCP knows that