Agenda - Council - 04/12/2022 - Laserfiche WebLink

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hl l U A Forterra Company March 14, 2022 To: Valued Distribution Partners and Customers Re: Scrap Surcharge As you are aware, the Russia-Ukraine conflict has resulted in additional disruptions to an already stretched supply chain. This conflict has impacted multiple inputs to our manufacturing process,the biggest of which is our scrap metal costs. Given the current situation, demand for steel and iron to be supplied by other countries is quickly growing. Those manufacturers are looking to buy more scrap, the same scrap we buy for daily operations. As a result, scrap costs are rising very quickly. The restrictions on pig iron coming from Russia and Ukraine further exacerbates the demand for scrap. Effective April 1, 2022, all product shipping from our facilities will incur a scrap surcharge to cover these increased scrap costs. While we hope this is a short-lived market condition, we have to prepare for the likely reality that this persists until the conflict has come to resolution, global sanctions on that region of the world are lifted, or some other market mechanism helps compensate for the increase in demand. That surcharge will be based on the national increase in shredded scrap pricing as tracked by Fastmarkets (https:/www.fastmarkets.com).The prior month average is released on the first business day of the month (i.e.,the increase for March will be confirmed on April 1"). It will be communicated on the second of the month and made effective the fifth day of the month. The shredded scrap index is highly correlated to the busheling index which was up $175/ton between February and March. Because of the even higher demand for busheling, we expect the shredded index to be up, but not more than busheling. Based on what we know as of this time, a good planning number should be between $125- 17S/ton. All surcharges will be noted as a separate line item on your invoice. As you know, our typical approach is to absorb increases and movements in raw materials pricing both small and large; however, the movement over the last two weeks is historically unprecedented. We believe a surcharge is the most effective mechanism for an adjustment because we intend for this to be temporary. When scrap pricing returns to February 2022 levels, we will pull back the surcharge. Should the conflict last longer and scrap prices remain higher for an extended period of time, we may consider converting the surcharge to a more permanent price increase, but it would be premature to determine that now. Also note, we will continue to strictly enforce our terms and conditions. If you wish to cancel your order for Made to Stock(MTS) material in lieu of paying a surcharge, you may do so with no cancellation fees. Cancellation fees still apply to Made to Order (MTO) materials. We regret having to take these actions; however,the metals markets have been greatly impacted by the situation abroad. We appreciate your support and patience while we all navigate these uncertain times. Best Regards, Vik Bhatia Howard Smith President Sr.Vice President of Marketing &Sales 214-693-1578 919-757-5411 2 Chase Corporate Drive, Suite 200 Birmingham, AL 35244 1 866.347.7473