Price Check STEEL SURCHARGE is Price Gouging

millsnhills · Mar 31, 2004

I am waiting for the surburban which gets 40 mpg /forums/images/graemlins/grin.gif. I hope I don't start getting the hate flyers on my truck like I did a few years back with the last fuel crunch. I usually drive a 12 year old Nissan but I have to have something which can haul the tractor, pull the boat and six kids to school.

raynman · Mar 31, 2004

RobS,

The Auto industry is changing, I have had some of my customer tell me that they have had quotes come back from steel suppliers stating quote is only good for 2 days!

We are still giving 30 day quotes and keeping to it, but we will also have a price increase soon due to Steel pricing!

We have also had customer come back with a year old quote and want us too sell at that price /forums/images/graemlins/shocked.gif

I have seen more and more of the Price Gouging and will probably see more in the future!

5030 · Mar 31, 2004

I just thought I'd throw this in, just for "kicks"

Our company is quoting steel on a 24 HOUR quote. That is, the price is good for 24 hours after it's quoted. After that, it's fair game. I work for the 2nd., largest supplier of flat rolled material in the United States. Our company actually owns large portions of 2 steel mills so we have preferential treatment when it comes to master coils. Like I said before, the Chinese scrap fiasco along with the Taconite shortage is going to hit everyone right in the pocketbook. Remember, as consumers, you and I are going to eat the price increases in steel along with fuel prices. I'd not be surprised to see gas prices in the $2.50 range for regular by late spring with diesel following suit.

As far as a surcharge on steel in ag implements and tractors, I don't see a problem with it. The manufacturers are just trying to stay marginally profitable. Their raw steel prices are going through the roof. Even the automakers are having to pay increased prices for steel despite contractual agreements. Suppliers like us, cannot supply raw steel at pre-2004 prices and stay in business. If you think, as a small business, CCI, that you can dictate to your suppliers on delivered prices, you may as well close your doors. You are living in a fantasy world.

If you are implying that you are going to absorb a surcharge placed on you by your suppliers, then you are a poor businessman. The fact of business life is that the surcharge is passed on to the consumer, either directly or indirectly. Which one are you??

HayDR · Mar 31, 2004

5030,
We are purchasing and negotiating for next season. This years stuff is already ordered and most of it is here. We've got the warehouses full of product at levels higher than last years record sales year. Current steel prices will have little effect on the majority of products we will sell this season.

sweettractors · Mar 31, 2004

This years stuff is already ordered and most of it is here. We've got the warehouses full of product at levels higher than last years record sales year. Current steel prices will little effect one the majority of products we will sell this season.

Mark --That is exactly what we did--However--Fortunatly for our customers,There are only a few individual items that we will see a price increase on this year--We think it is best for all concerned, to be open and upfront about our pricing--Ken Sweet
Sweet Farm Equipment LLC *Over 1000 items in stock Today*

HayDR · Apr 1, 2004

Some dealers are saying we have "A Few" items that have a "Steel Surcharges" but are not listing which items have a steel surcharge. How is a customer to know what items have "Steel Surcharges?" This is close to a bait and switch scheme. We at CCM believe a dealer should not post any price if that dealer can not definitively state the exact price.
CCM- HOME OF NO STEEL SURCHARGE PRICING

5030 · Apr 1, 2004

Ken and Mark:

To the both of you, I admire your stance as related to the market at this time, but it may bite you in the posterior. You both have established inventory, however, when that inventory is depleted, you may have to increase your otd prices substantially as the surcharges will most likely increase as the year progresses. Special ordered items will have the surcharge attached from the manufacturer as of now.

I am thankful I am not in your business. I'll just keep on hauling the raw material. It just amazes me how much the delivered price has increased in just the last 45 days.

On another note, I just requested a quote from my New Holland dealer on a spray system for my round bailer for haysaver. he told me right away that a "surcharge" would probably be attached to the price of the unit. I can accept that. At least it won't be "hidden" in the total cost.

Even the auto makers are being hit with the surcharge even though GM is suing 3 mills over it. They are paying it because the mills have told them if they don't, they get no steel. Plain and simple.

Do you think that for a minute, that GM isn't going to pass along that price increase to the consumer in the way of increased vehicle cost? You know they are. So will Ford's and Diamler Chrysler. That is how it works and the consumer is at the bottom of the food chain.

megotatractor · Apr 1, 2004

I work for a plumbing/hvac/industial wholesaler and the price of gavanized heat duct and pipe is rising through the roof.

sweettractors · Apr 1, 2004

however, when that inventory is depleted, you may have to increase your old prices substantially as the surcharges will most likely increase as the year progresses 

In our case, that is a slight possibility--However--I am betting the Dollar goes stronger vs the Euro, lower steel prices after the panic has subsided plus the Saudis have pledged to help get oil back to target price of $25/ per barrell. In addition, being a election year is a positive for economic things to get better rather than worse in the next few months--Just to hedge my bets, I have recently purchased hundreds of used pieces to be able to have alternatives available for our customers--Ken Sweet
Sweet Farm Equipment LLC *Authorized Tufline Cultipacker Dealer*

millsnhills · Apr 1, 2004

I was reading this thread with interest and then after yesterday with some anger attached /forums/images/graemlins/mad.gif I am in the process of building a house and after having an engineer over to meet and inspect some second floor (floors) and roof joist we thought it best to add some LVLs and Steel plates.

I went to a local metal fabricating outfit where I know the owner. I ordered a 18ft span 5 1/4 wide and 3/4' thick, and another 16 ft span and same deminsions. the price was 795.00 tax undelivered and no crane. He told me it was good that I ordered yesterday as it was going up another .10 per pound and that 3-5 weeks ago it was about half the price.

Don't know who or why but there is a smell of gouge somewhere around here.

MikeInIdaho · Apr 1, 2004

I agree. if the supplier didn't purchase the steel or lock in the price when he accepted your order then that was his decision to speculate that the price would not go up. He should live with that choice.

HayDR · Apr 2, 2004

5030,
We have been in the machinery business over 30 Years and understand supply & demand and profits. Our money is not made when we sell items, it is made when we purchase them. Our family has traded cattle, horses and mules since the 1600's. If you don't know the market value of any item you had better stay out of the market. Ken Sweet doesn't need a babysitter either, he's not some Johnny come lately. "Tough times never last but tough people last."

fivestring · Apr 2, 2004

"the Saudis have pledged to help get oil back to target price of $25/ per barrell." 

And I believe and trust them as much as I believe there is life on Mars.

The Saudis, along with OPEC, just decided to CUT oil production by 1 million barrels a day.
We will never see $25 barrel oil again.

sweettractors · Apr 2, 2004

The Saudis, along with OPEC, just decided to CUT oil production by 1 million barrels a day 

I am also, somewhat apprehensive about what the Saudis will or will not do--However--As someone said before my time, I dont make the news, I just report it /forums/images/graemlins/smirk.gif--Actually, Fox News reported that yesterday--Ken Sweet
Sweet Farm Equipment LLC *New Italian made 5 ft double action sickle mowers in stock*

5030 · Apr 2, 2004

Gary:

Remember, a barrel of oil isn't really a 55 gallon barrel either.

When it comes to the oil cartel in the middle east, well, I think they invented gouging. In a way, I'd like to see the price of crude get to about $40.00 a barrel. At that point, our domestic reserves look might good. We have oil here and plenty of it. It's just not cheap oil like the middle east has. At $25.00 per barrel, the Arab oil ministers have a lock on production. At $40.00 plus, our reserves come into play.

Remember something else about steel making that people seem to forget. It's real energy intensive. That energy is in the form of natural gas, coal, coke or oil. All those energy sources have seen a sizable increase in price in the last 6 months.

sweettractors · Apr 2, 2004

5030, You really hit the nail on the head on that one--The potential is definitaly here for increased domestic production--We have just had 11 wells drilled on our property and 10 of them have the potential of being nice natural gas/oil producers--2 years ago, I would have not believed that, as a remote possibility. Now. it looks like, we are only a few weeks away from putting "In the Mix" our small contribution for domestic consumption from the backwoods of Ky--Ken Sweet
Sweet Farm Equipment LLC *Now 2 Locations to Serve Our Customers + The Website*

John_Mc · Apr 2, 2004

( If you contact us for an item you want to know the delivered price don't you? You would be upset if after the item was delivered, we put another charge on your card and you called and asked what the charge was for and we said a "STEEL SURCHARGE". Many of the companies today are doing just that. )

IMO it's not the steel surcharges that are the gouging, it's how your suppliers are applying them retroactively. If, on the other hand, they quote you a price of $X + (a surcharge based on the price of steel at the time your order is due), and you accept that quote, then you have no complaint. It's the guys who try to initiate a surcharge after the order has been accepted that are gouging... or the guys who are late on a promised order and try to hit you with a hogher surcharge than what you would have been charged had they shipped on time.

John Mc

5030 · Apr 2, 2004

John:

This is kind of a Grey area as far a business, especially the steel business is.

I don't sell steel, just haul it at my day job. I do work for a large supplier though.

Here is the scenario...
You have a number of coils in your warehouse that you obtained at the pre-surcharge price.
Remember, the surcharge itself is really the cost of obtaining the coils from the mill. The surcharge doesn't reflect any profit for the supplier. It's just like the fuel surcharge that trucking companies are putting on the freight invoices. It just covers the increased fuel price.
Anyway, you apply the surcharge to coils applied to customers invoices at the increased rate even though the coils applied were bought at the pre-surcharge price.
You do that because you are only covering your coil purchases at the now-surcharge price.
The only way a supplier will profit at all from the surcharge is if the industrial economy suddenly reverts back to the pre-surcharge environment. I don't see that happening until at least the 4th quarter of 2004 and maybe not even then. It would be ludicrous for any supplier to deplete his pre-surcharge stock material at the pre-surcharge price only to be faced with customers expecting accustomed to the lower price and expecting that price to be held throughout the crisis. Any steel supplier who would do that, our company included, would go bankrupt in short order.

The steel crisis, though not reported in the newspaper has been brewing since before the first of the year. We can't discuss politics here, but big brother has known all along what the scenario was going to be and did nothing about it. I believe that the American people were not informed by the media because it wasn't sensational and sensationalism sells newspapers.

It all boils down to increased costs that will be shouldered by the consumer, you and I.

5030 · Apr 2, 2004

Ken:

I read the local paper this evening and the article about the Saudi's was on page 4. I don't buy it.

It is a well known fact that the North American oil reserves make the Arab oil field pale by comparison and the Arab oil ministers know that. They know that the price per barrel must be kept below the threshold that will allow American reserves come into play. Remember, they don't have to deal with the bureaucratic red tape that we have in place here. That is what makes their oil cheap. Besides, when their reserves are depleted and they will be depleted in the future, there go the palaces and Bentley's. Back come the mud huts and camels. The oil deal is all about sticking it to the capitalists and making money. The Saudi's don't give a hoot about the global economy or world affairs.
Remember too, that the steel crisis came about over a period of time with many factors influencing the outcome. I posted a while ago about the Taconite shortage as well as the Chinese buying American scrap by the boatload. That coupled with the current administration rolling off the import duty on foreign steel has set the stage for China to do some really serious gouging and line their pockets with American dollars. Even though our dollar is weak in the world economy right now, the American dollar is still the benchmark by which the nations of the world set their clocks by. European countries would have you believe that the Euro is. It isn't. The Euro is just the European communities way of standardizing, sort of like ISO. This country sets it's standard to the QS SOP's. Just like we use the English system of measurement while the European community uses the metric system.

It's interesting, that Machinery made in Japan for importation to the United States and I'm not talking about farm machinery, comes here with english fasteners and tooling or measuring devices in primarily english with metric backup. The same holds true for China, Korea, Germany or any other European community. They all know who butters their bread even though they would lead you to believe that the shoe is on the other foot.

John_Mc · Apr 3, 2004

Daryl-

I have no arguments with steel surcharges. I've worked for a steel wire manufacturer for about 18 years now. We buy steel rod from a number of steel mills. In years past, one or two price increases per year was it, and we had plenty of notice before they went into effect, so we could notify our customers in plenty of time if we had to increase prices. Over the past 6 months or so, the price increases we see (through the steel surcharges based on scrap prices) have come so fast... a couple of weeks apart, that we haven't even finished negotiating the first round of increases with our customers before the next takes effect. As a result, we were forced to add a surcharge ourselves. We announced in well in advance, and our customers know at the time they place their orders that our pricing is $XX plus the surcharge in effect at the time.

My point was that steel surcharges are NOT price gouging in and of themselves, but that how some companies apply them can easily be seen that way. We did not try to apply it retroactively to orders that we were late on which were originally promised to be shipped before the surcharge was announced. It is this practice, mentioned by someone earlier in the thread, which I had to agree just doesn't seem right.

John Mc