Topco Indirect BLOG

Changes in Stainless Steel Surcharge Calculations

Posted by Fri, Aug, 19, 2011 @ 12:08 PM

Written by: Carolyn Harris, Sourcing Manager – Equipment

As we see stainless steel pricing decrease in a never ending volatile market, the roller coaster ride we’ve been experiencing has yet to cease regardless of the fact that mills are cutting deals to move inventory these past two months.  The anticipation of stability in stainless steel pricing is hinging on the fluctuation of nickel prices, our macro-economic outlook and changes in stainless steel surcharge calculations. Prices have dropped, demand is low, and buyers have been reluctant to buy more than they need for fear that they will be left with high priced inventories should the market keep falling. The current market surcharge structure allows buyers a two month window of visibility of what the surcharge for steel will be which has allowed them to stall their purchases for deeper discounts.

However, with the new surcharge structure that several large mills are adopting, the two month window of visibility will be reduced to less than a month for nickel and a month for metals such as iron, ferrochrome, molybdic oxide, etc.  The Sink2 Tub Non NSF resized 600difference in the two surcharge calculations for the month of September is:

  • The current nickel surcharge is the average price of nickel for the month of July
  • The new surcharge mechanism for nickel is based on the average price from the 21st of a month (July) to the 20th following month (August)
There is much discussion on who actually benefits from this change, for the mills it provides smoother flow of inventory since it limits the visibility of the buyer to alter their purchases knowing prices will drop in sixty days. This method of calculating stainless steel surcharges has been used by the Europeans for the last three years, however many mills are reluctant to adopt the new change. There is anticipation of premature price increases in September, so if stainless steel sinks & tables or equipment are needed, place your orders now. How are your suppliers advising you to purchase your equipment in this volatile steel market?

Tags: stainless steel pricing