because the volatility in the market has shown the second week to be more representative of the entire month.) In this example, the Chicago market price is $450/ton, and the basis for pricing when the work was originally quoted is $150 per ton. The metalcaster subtracts the base of $150 from the $450/ton market price for a difference of $300 per ton. This number is generally reported as dollar/pound. So, in this example, the difference is $0.15/lb. ($300/2,000 lbs). What prevents accurate direct comparison between metalcasters’ surcharges is the basis of the pricing. For instance, some metalcasters melt broken auto castings, while others only melt steel busheling. When a customer is communicating
A casting customer should clarify with its supplier the calculation for base pricing, the base price of all components used in the surcharge, the components of the sur- charge included in the model being used, the duration of the surcharge, and the starting date the pricing takes effect.
from previous levels in the last two months. According to industry analysts, the global demand for steel production has the largest effect on the price of scrap metals and, consequently, the surcharges related to them. The only alternative to using
with the metalcaster about surcharges, several points should be clarifi ed to avoid surprises to either party. These points include the calculation for base pricing, the base price of all compo- nents used in the surcharge, the com- ponents of the surcharge included in the model being used, the duration of the surcharge, and the starting date the pricing takes effect.
Are surcharges here to stay? The fl uxuation in pricing for the
raw materials used in metalcasting facilities is more volatile than it has been in 30 years. During the last half of 2009, the global demand for these ingredients was down, and therefore surcharges settled into a higher but more stable range. With the recession possibly coming to an end and China’s economy beginning to heat up again, metal prices have increased almost 25%
Online Resources
Visit the following scrap-reporting websites for information on scrap price trends.
Iron Age Scrap Price Bulletin:
www.scrappricebulletin.com London Metal Exchange:
www.lme.com
American Metal Market:
www.amm.com/pricing Ryan’s Notes:
www.ryansnotes.com
MarCh/aPril 2010 Metal Casting Design anD PurChasing 31
surcharges on highly volatile com- ponents is adjusting pricing more frequently to overcome drastic changes. The copper- and aluminum- based industries have a global price
set by the LME index, which comes out on a monthly basis. The metalcasters in these markets typically ad- just the pricing on a monthly basis to cap- ture the current price as they purchase alumi- num or copper. When the metal is used and they make the next purchase, the pricing is adjusted accordingly.
How can I receive fair surcharges?
An educated customer who is famil-
iar with the scrap reporting publica- tions is better equipped to negotiate surcharges (see this article’s online re- sources). Armed with this information, metalcasters and end-users can have an educated negotiation regarding the use, implementation and length of the surcharge period.
METAL
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