In an apparently unprecedented move, GE Plastics of Pittsfield, Mass., announced Jan. 20 that it is instituting a surcharge on the prices of its engineering thermoplastic resins. The surcharges nominally are ``retroactive'' to May 2, 1994, but they do not raise prices for products shipped before Feb. 1, 1995, the date they go into effect.
The surcharges account for the three price hikes since May 2, and add significant increases on top of them.
GE spokesman Dan Adamus provided in a Jan. 25 telephone interview the following example of how the surcharges will work:
GE has placed a 19 cent-per-pound surcharge on the price of its Lexan polycarbonate resins. If a customer who buys Lexan saw a 10 cent-per-pound price increase since May 2, that previous increase is counted as a part of the surcharge and the customer will have an additional charge of 9 cents per pound on resins shipped after Feb. 1.
With an average market price for PC at about $1.43 per pound, the current increase represents about a 6 percent rise Feb. 1.
Adamus said GE decided to institute a surcharge for its resins because of the large increases in the costs of raw materials that the company saw in 1994.
Executives of other resin manufacturing companies expressed surprise both at GE's move to a surcharge on prices, and that the surcharge is effective retroactively. Several of those officials said they never heard of such a pricing practice.
Several angry processors said they viewed GE's move as a deft legal maneuver that permits GE to institute further price increases without consideration for existing contracts.
Adamus defended the move as a necessary step.
He said GE Plastics protected its customers by absorbing some of the increased costs for raw materials through 1994, and has faced a decision of whether to pay even higher costs for raw materials or face shutdown of production capacity.
``This is an attempt to recover - in a way that a pricing action does not do - some of the costs of the inflation in raw materials prices that we have seen,'' Adamus said. ``There are a lot of dynamics at play in the industry'' that prevent a recovery of costs through a traditional price increase, he explained.
``We can't continue to absorb the higher prices for raw materials. It is our view that raw material prices will remain high in 1995, and that we have no other way to offset these higher costs except through sur-charges,'' Adamus said.
``We can't predict raw materials costs, but we will continuously review those costs and we will take the warranted action -whether increasing or decreasing our surcharges - in the future,'' Adamus added.
The announcement affects prices for its PC, ABS, polybutylene terephthalate, polycyclohexylenedimethylene terephthalate, PET, polyetherimide, polyphenylene oxide and polyphenylene ether and thermoplastic elastomer resins, and blends of those resins, Adamus said. GE Plastics and its competitors increased prices for those products three times since May 1994.
Here is a listing of GE's products and surcharges. All surcharges are on a per-pound basis. GE placed:
A 19 cent surcharge on Lexan PC resins, on Xenoy PC/PBT resins and on Cycoloy PC/ABS blends.
A 21 cent surcharge on Cycolac engineering ABS resins and Cycoloy flame-retardant grades.
A 26 cent surcharge on flame-retardant grades of Cycolac resins.
A 17 cent surcharge on Noryl and Prevex PPO and PPE resins.
A 23 cent surcharge on flame-retardant grades of Noryl and Prevex resins.
A 15 cent surcharge on Noryl GTX resins and Ultem PEI resins.
An 18 cent surcharge on Valox-brand PBT, PET and PCT resins and TPE resins sold under the Lomod trade name.
A 24 cent surcharge on flame-retardant grades of Valox.