For manufacturers who use industrial grade Hydrogen Peroxide.....
Today’s Blog is by Ryan Melowic Vice President of Customer Services at SafeSourcing.
For manufacturers who use industrial grade Hydrogen Peroxide in their production process, it is important that they have a thorough understanding of what indexes can affect its price. In this category some manufacturers use a shared risk – shared reward model that follows the variations in both Natural Gas and Diesel fuel pricing.
Some manufacturers are using the Nymex Henry Hub Natural Gas Index. They figure surcharges by calculating an average monthly settlement price and then compare it against a set base line. If the Nymex average price is greater than the baseline, they will subtract the current monthly average settlement price from the baseline and then multiply it by a fixed number that is dictated by thresholds based off of the average monthly settlement price. With a fifty cent change in the Nymex Henry Hub Natural Gas Index price it isn’t uncommon to see a 2% increase on the cost of Hydrogen Peroxide.
In addition, a fuel surcharge that changes on a monthly basis is used by some hydrogen peroxide manufacturers. They define additional surcharges for pricing thresholds and compare it to the current cost of diesel on websites like the Department of Energy. From there, they set surcharges for delivery based on the price of diesel. Pricing for diesel in the mid four dollar range can add around 2% to hydrogen peroxide costs.
With ranges in costs hinged on indexes, Hydrogen Peroxide prices can change 4 to 10 percent depending on the current market. This makes it difficult for manufacturers to hold their pricing for the finished product. However, most manufacturers are expected to lock the pricing of their finished goods for at least a year. How is this fair for the manufacturers of the finished goods?
For further information how SafeSourcing can help your company lock in competitive hydrogen peroxide pricing for a longer duration than monthly, please contact a SafeSourcing Customer Service Representative.
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