Steel prices are going up. Your mill just announced a $40 per ton increase effective in two weeks. Your inventory was bought at the old price, so you have a window where you could absorb the increase and maintain the current price to customers. Or you could pass the increase through immediately. Or you could do something in between. What you do in the next 48 hours determines whether this price increase adds to your margin or creates a customer retention problem.
The Timing Decision
When your replacement cost goes up, your selling price should eventually follow. But timing matters. If you pass through the increase the same day the mill announces it, while your inventory was bought at the lower price, you capture a windfall margin on existing stock. Your customers know this, and some will resent it. If you wait until your new, higher-cost inventory arrives to adjust pricing, you maintain trust but your margin on current stock stays flat while your replacement cost has already increased.
The middle path works best for most service centers. Announce to customers that pricing will increase in 7 to 10 days, giving them a window to place orders at the current price. This creates urgency (they order now, which is good for your cash flow), demonstrates fairness (they had a chance to buy ahead), and positions the increase as market-driven rather than opportunistic.
How to Communicate the Increase
Call your top 20 accounts personally. Do not send an email blast. A phone call from their sales rep that says "I want to give you a heads up before this hits the market" is relationship-building. An email that says "Dear Valued Customer, we regret to inform you..." is relationship-neutral at best.
The conversation should cover three points. What is happening: "The mills announced a $40 per ton increase effective March 1st." Why it is happening: "Scrap prices are up $30 per ton and the mills are passing that through. This is industry-wide, not specific to us." What you are doing: "We are holding current pricing through next Friday to give you a chance to place any orders you have in the pipeline at today's price. After that, our pricing will reflect the new cost."
Be factual, not apologetic. You did not cause the increase. You are passing through a cost change that affects every distributor in the market. Apologizing implies you have a choice, which invites the customer to negotiate. Being factual positions you as a transparent partner who is sharing market intelligence.
Handling Pushback
Some customers will push back. "Your competitor is not raising prices." Maybe that is true right now. It will not be true in two weeks when their competitor's lower-cost inventory runs out and they face the same replacement cost. You can say exactly this: "They may be selling from older inventory right now. When they reorder at the new cost, their pricing will adjust too. We prefer to be upfront about where the market is heading."
Other customers will ask for an exception. "Can you hold my price for another month?" The answer depends on the account value and the size of the increase. For a $500,000 annual account asking you to hold pricing on a $40 per ton increase for 30 days, the cost of accommodation on a typical order is $800 to $1,200. That is cheap relationship insurance. For a $20,000 annual account asking the same thing, the economics do not justify it.
When Prices Drop
Everything above works in reverse when prices decline. And this is where most service centers get the trust equation wrong. They pass increases through immediately and delay passing decreases through for as long as possible. Customers notice. If you built trust by being transparent on the way up, maintain it on the way down. When your replacement cost drops meaningfully, adjust your pricing within the same timeframe you used for increases. The consistency builds long-term credibility that is worth far more than a few weeks of inflated margin on declining inventory.