What is in a price announcement?

What is in a price announcement?

Last Friday's price announcement from Nucor regarding rebars, merchant bars and structural products continues the trend of adjusting the Raw Material Surcharge (RMS) and offsetting it by manipulating the base price up or down. It all started early in 2004 when the scrap price started to rise on an almost daily basis. Most US mills followed Nucor's example and instituted a raw material surcharge (RMS) to reflect the seemingly inexorable rise in scrap prices. The mills wanted to show to their customers that it really was not their greed that drove the prices up. But the scrap price can be whatever it wants to be -- in the end there is a market price that customers are willing to pay. Since then, it has become common to increase the RMS and decrease the material base price, or, as the case was yesterday, to lower the RMS and increase the material base price, depending on the scrap price and the market. It seems to us that it is so much harder to decrease a flexible surcharge than it is to increase it. Be that as it may, in the end Nucor thought that the market is strong enough to maintain their rebar, merchant bar and structural pricing in the face of lower scrap prices. And they might as well be right. Just please don't take one full page to explain to your customers that pricing remains unchanged replete with decrease here and increases there with a net effect of zero. We say: scrap the RMS and play the market. You are doing it anyway.