The primary material used in the Hot Dip Galvanizing process is zinc. Zinc is a commodity that is quoted on the London Metal Exchange in dollars. This means that it is subject to both market and foreign exchange volatilities.
In order to deal with these volatilities Galco operates a surcharge system that is applied to the base galvanizing price and can be adjusted as necessary to deal with zinc price movements. Galco does not apply surcharge adjustments to minor fluctuations in zinc price, but only where significant changes have resulted in the sales price of galvanizing being impacted materially.
These surcharge adjustments are applied based on when Galco purchases and uses zinc stocks rather than when the market price changes. This means that changes in surcharge levels are generally delayed by 1-3 months against market figures. Galco endeavours to give our customers as much notice as possible in introducing changes to surcharge and this is normally at least 1 month.
In the 4 years to 2014 zinc prices remained reasonably consistent and no changes to surcharge were applied. However since then huge volatility has occurred in zinc markets and Galco was left with no option but to apply a number of surcharge adjustments. We continue to review zinc prices and surcharge levels on an ongoing basis.