Manufacturers Add Natural Gas Surcharge
A New Jersey specialty chemical company and two Pennsylvania
steel companies have announced they will be adding a natural gas
surcharge that tracks NYMEX onto the sale price of their products
to reflect the increased cost of fueling the manufacturing process.
Cytec Industries, West Patterson, NJ, said it would be adding
the surcharge to its January melamine prices. Using the New York
Mercantile Exchange published natural gas prices for each month,
Cytec will implement a surcharge of +1 cents/lb. on melamine
crystal for each 25 cent/MMBtu increase in natural gas (vs. a
natural gas base price $4.50/MMBtu in effect November 2000). In
January the published natural gas price is $9.98/MMBtu for a
difference of $5.48. Therefore, Cytec's melamine crystal surcharge
will be +21.9 cents/lb during the month of January.
The two Pennsylvania companies Carpenter Technology, Wyomissing,
and Universal Stainless & Alloy Products, Bridgeville, both
have said the use of the surcharge will help them compensate for
fuel costs without having to frequently re-calculate their basic
Universal Stainless said its surcharge will be determined by
comparing the previous month's average NYMEX daily settlement price
to a base rate of $2.20/Mcf. The company uses between 40 MMcf/month
and 60 MMcf/month. The surcharge calculation also will be based on
how much energy it takes to make the individual products.
Universal Stainless attempted to implement the surcharge in
October, but met resistance from customers who argued that the
increase in gas costs was temporary. "However, current projections
indicate this is not the case, which justifies our decision to
implement this surcharge now," said Mac McAninch, company
president. "If energy costs revert to previous levels, the
surcharge will dissipate."
Richard Ubinger, Universal's chief financial officer, said the
company buys mainly spot gas. The question remaining is "whether
the customers are going to pay the surcharge."
Carpenter will be applying its surcharge, also based a monthly
NYMEX settlement price minus a $2.20 base, to products produced by
its Specialty Alloys Operations unit. Based on January market
prices quoted on NYMEX the surcharge will add about 2% to
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