Weds April 15th AMM (American Metal Markets) featured an article disclosing that a growing number of copper and brass servicenters are pulling in their credit terms as they fight to survive. One Servicenter Executive commented, “We’re having to tell more and more people they’re on COD–it’s not worth selling if you’re not going to get paid.”

Although some servicenters are trying to work with their customers; taking them to court remains an option. Court is always a last resort, but with the demise of Guardian Metals and the closure of AJ Oster’s Allentown, PA facility, it is apparent; cash is king and key to survival.

The article continues, ” …many red metal distributors are returning to square one and denying credit from the get-go if they catch even a whiff of default.” With a GM Bankruptcy becoming more likely and Delphi’s credit arrangement expiring in June; the supply base is increasingly vulnerable and prone to failure.

My advice: Protect your current term arrangements with your suppliers. First- Pay on time and in full. Second-If you must be tardy- communicate! They will likely work with you to manage through these tough times.  Third-Convert old/obsolete raw material inventory into cash. The copper scrap market is up 43% from Feb EOM. Turn your inventory and get the cash. Lastly- only order material that you can turn quickly- flip your inventory in 1 week or less- don’t stock- you may pay more but your cash flow will be much lower.