As we navigate our way in an ever evolving and challenging domestic manufacturing environment, we encounter many daily challenges.
While we control what we can as it relates to containing costs in a competitive market, there are some costs that remain beyond our control, with raw material being at the top of that list.
With scrap metal pricing being one of the cost drivers in the manufacture of CHQ rod, this cost component has become volatile and costs have risen to where they have reached the saturation point. We have no choice but to pass along a portion of this cost, of which we have chosen to do so in a transparent manner. It is our opinion that this is the most favorable means to accomplish this objective.
Please read below for the details of such:
1) The scrap surcharge is derived by steel mills bidding in a global market on prime scrap to melt CHQ steel. The scorecard, if you will, is the AMM #1 Busheling.
2) Scrap Surcharge from the steel mills apply at the time material is shipped, not when it is ordered. A base steel price can be firm for the year, and a scrap surcharge is added on top of the base. The scrap surcharge changes monthly and is sent out from the mills, usually the 2nd week of the month for the upcoming month. Basically a 2-week price change notice.
3) Lead time for CHQ rod is 8-10 weeks. To maintain a steady supply of material, we must forecast out 10-12 weeks with no idea of what the surcharge will be. This does not normally present a problem when scrap is not volatile and stays within a +/- ($.01-.02) / lb. range.
4) The current scrap surcharge is very volatile. The average last year was $.05/lb., added to the base price. In January, the price went to $.11/lb., and we are seeing even bigger increases in February and March. With an increase this significant, we have no choice but to pass this onto our customers.
5) Looking ahead, even the steel mills do not know what the increase will look like for April and beyond. We must continue to order material to ensure that we are not closed out of the mill rolling and therefore would have no material to manufacture from.
Contact us at 800.988.BOLT, or visit www.autoboltusa.com for all your fastener requirements.
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