Timken Modifies Scrap Surcharge on Steel

The Timken Company (NYSE: TKR) announced today that it would change its scrap surcharge mechanism for alloy steel products from No. 1 Heavy Melt to the No. 1 Bundles indicator as reported in American Metal Market. Using a trigger point of $115 per ton, a scrap surcharge will be calculated monthly based on a three-city average of No. 1 Bundles in Chicago, Cleveland and Pittsburgh as reported by American Metal Market on the fifth working day of each month. This calculation will determine the following months' surcharge and will be added to the invoice. The new surcharge trigger will be effective with shipments beginning December 1, 2003. "Rapidly rising costs, particularly in scrap, alloys and energy continue to plague the industry," said Robert N. Keeler - director - steel sales - North and South America. "This change reflects the reality that bundles are a major driver of scrap prices, and therefore are more commonly recognized by other producers and automotive-related companies as an industry standard. It will also result in a larger and more timely recovery of currently volatile scrap prices." "In addition to the cost issue, we are becoming increasingly concerned about the availability of scrap going forward. We have already chosen to curtail some scrap purchases due to significant cost spikes," said Keeler.