Bar Fuel Surcharges Are Falling – Why?

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Bar fuel surcharges have been falling the past couple months — not to mention a broad fall-off in steel prices in general — so steel buyers look to be in a better spot this summer as far as their metals sourcing goes.

After months of fuel surcharge increases, notable steel producers such as Nucor and Steel Dynamics have lowered their bar fuel surcharges over the past two months. Also, the bar fuel surcharges calculated and published by the MetalMiner IndX℠ show a considerable decline in recent months.

We’ll take a look at how the economy has played a part in shaping this, and why surcharges matter.

According to the site of their Roanoke bar division, Steel Dynamics, after increasing the bar fuel surcharge for four straight months (from February to May), decreased its bar fuel surcharge for trucks two percentage points for June shipments, and two more percentage points for July shipments.

Nucor, for its part, decreased bar fuel surcharges for prepaid July shipments for several of its bar mills, including its Auburn, Kankakee, Jackson, and Jewett (Texas) mills.

MetalMiner’s monthly Construction MMI® — a key sub-index tracking metals used by the construction industry and available before public release to all MetalMiner IndX℠ subscribers — has fallen for the past two months, registering a value of 91 in July, down 2.2 percent from June’s reading of 93.

According to the MetalMiner IndX℠, the weekly US Gulf Coast bar fuel surcharge fell 10 percent over the past month, the second straight month of declines. The weekly US Rocky Mountain bar fuel surcharge declined 10 percent over the past month as well. The weekly US Midwest bar fuel surcharge dropped 6.4 percent back in June, but has increased slightly in July.

What’s Happening With Oil Markets

NYMEX crude oil futures contracts declined $10 or 10.59 percent during the last 12 months, according to Trading Economics, and it’s certainly evident in the price trendline since mid-April of this year, seen below:

Brent crude prices, the global benchmark, have followed suit since late spring:

The EU debt crisis, primarily, and indications from large, emerging Asian economies that their economic growth will not be growing as strongly as in the past few years have pulled oil prices down, which has trickled to diesel prices at the pump.

How long will this last?

To be continued in Part Two later today. 

 

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