Material price surcharge

Background information on the material price surcharge for synchronous servo motors

Magnets containing the raw materials neodymium and dysprosium are used for the synchronous servo motors. Due to a general shortage on the global market, the prices of these rare raw materials have increased dramatically since the end of 2010. This price trend has therefore led to a severe increase in the cost of magnets and thereby also synchronous servo motors. To cater to this pronounced increase in costs, a material price surcharge (MPS) has been introduced.

This MPS does not actually contain any extra charges, but rather simply reflects the additional costs of the magnets caused purely by the procurement situation. It is not currently possible to predict the global price development. However, we must assume that these resources are likely to become even rarer and that the prices will therefore continue to increase.

Calculating the material price surcharge

The MPS is based on quotes provided by Asian Metal www.asianmetal.com for the raw materials of neodymium and dysprosium.

The MPS is calculated based on the weight of the rare elements contained in the magnets and the difference between the current raw material price and the March 2011 base price. The key factor for the material price surcharge to be paid is the rate we pay on the day of invoicing, assuming the respective invoice is drafted no later than 5 days after delivery. Otherwise, the value valid on the day of delivery is used.

Formula for calculating the MPS:

Level of MPS per motor Weight of neodymium per motor in kg x (neodymium price quoted on the cut-off day - base value of neodymium as of March 2011) + weight of dysprosium per motor in kg x (dysprosium price quoted on the cut-off day - base value of dysprosium as at March 2011)

(The key quotes are those provided by Asian Metal. The "cut-off day" is the date defined above for calculation of the MPS.)