A New Jersey specialty chemical company and two Pennsylvaniasteel companies have announced they will be adding a natural gassurcharge that tracks NYMEX onto the sale price of their productsto reflect the increased cost of fueling the manufacturing process.
Cytec Industries, West Patterson, NJ, said it would be addingthe surcharge to its January melamine prices. Using the New YorkMercantile Exchange published natural gas prices for each month,Cytec will implement a surcharge of +1 cents/lb. on melaminecrystal for each 25 cent/MMBtu increase in natural gas (vs. anatural gas base price $4.50/MMBtu in effect November 2000). InJanuary the published natural gas price is $9.98/MMBtu for adifference of $5.48. Therefore, Cytec’s melamine crystal surchargewill be +21.9 cents/lb during the month of January.
The two Pennsylvania companies Carpenter Technology, Wyomissing,and Universal Stainless & Alloy Products, Bridgeville, bothhave said the use of the surcharge will help them compensate forfuel costs without having to frequently re-calculate their basicproduct prices.
Universal Stainless said its surcharge will be determined bycomparing the previous month’s average NYMEX daily settlement priceto a base rate of $2.20/Mcf. The company uses between 40 MMcf/monthand 60 MMcf/month. The surcharge calculation also will be based onhow much energy it takes to make the individual products.
Universal Stainless attempted to implement the surcharge inOctober, but met resistance from customers who argued that theincrease in gas costs was temporary. “However, current projectionsindicate this is not the case, which justifies our decision toimplement this surcharge now,” said Mac McAninch, companypresident. “If energy costs revert to previous levels, thesurcharge will dissipate.”
Richard Ubinger, Universal’s chief financial officer, said thecompany buys mainly spot gas. The question remaining is “whetherthe customers are going to pay the surcharge.”
Carpenter will be applying its surcharge, also based a monthlyNYMEX settlement price minus a $2.20 base, to products produced byits Specialty Alloys Operations unit. Based on January marketprices quoted on NYMEX the surcharge will add about 2% toCarpenter’s products.
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