Alloy Surcharges
April 1, 2010
To Our Valued Customers:
Alloy surcharges on steel wire and steel cable products have become the norm in these times of widely ranging values of the raw material elements that comprise the majority of the steels we work with and sell to the marketplace.
The predominate elements I’m referring to are Nickel, Chromium, Molybdenum and Iron. To a lesser extent, Copper, Tin and Zinc are elements that are incorporated in some wire and cable products that we manufacture as well. All of these elements are traded on the world metal markets and are subject to fluctuations based upon demand, increasing or decreasing inventory levels, production capacity and just plain speculation by the metals traders.
Nickel is the element that really drives the surcharges for stainless steel products. Eight to ten percent of 302/304 stainless steel is Nickel. In the chart below you can see the wild ups and downs of world spot nickel prices for the past 5 years (chart provided by Kitco Metals):
To give the chart above some perspective, the closing price for nickel on October 1, 1998 was $1.81 per pound! As I write this letter this morning the current nickel price is $8.05 per pound. That’s a 445% increase over the past 11 years! I wish I had bought Nickel futures instead of investing in my 401K!
Energy costs have also continued to rise and many of our suppliers incorporate these increasing costs into the alloy surcharges. For our stainless steel products we use the surcharges as reported by Carpenter Steel who is our primary domestic supplier. Their alloy/energy surcharges can be found on their website. For carbon steel cable products we use the reported surcharges of Bridon American Wire Rope and their surcharges may also be found on their website.
Many customers have thought that because of the economic downturn our prices should be going down. Unfortunately because the raw materials we purchase to make wire, and ultimately cable and cable assemblies from, have not decreased we have not been able to reduce base prices of our products. We do of course fluctuate the alloy/energy surcharge on a monthly basis.
We certainly appreciate your business especially during this period of our global economic malaise. We see some positive signs that our economy has bottomed out and we could be climbing our way back to normalcy. We hope that your business is starting to see increased activity as well.
Please feel free to contact me directly, or any of our experienced Product Managers, if you have any questions.
Sincerely,
Michael M. Wallace
Vice President of Sales & Marketing