Price Check STEEL SURCHARGE is Price Gouging

[MikeInIdaho]

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]

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]

<font color="blue">"the Saudis have pledged to help get oil back to target price of $25/ per barrell." </font>

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]

<font color="blue"> The Saudis, along with OPEC, just decided to CUT oil production by 1 million barrels a day </font>

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]

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]

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]

</font><font color="blue" class="small">( 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. )</font>

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]

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]

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]

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