Speaker 1  00:11
All right. Well, good afternoon, everybody, and welcome. I'm Michael Workman, the executive director here at ResinSmart, powered by RTI. For those of you that are spending your lunch hour with us, thank you. For those of you that are just tuning in, thank you. If you happen to join us in August, you watched Tyler and I negotiate a polypropylene contract live with a cone of silence. You could hear what each of us was thinking. The engagement level was pretty high. A lot of you asked for more, and so last week we at the Manufacturers Association of Plastic Processors and Best Practices and Benchmarking Conference in Indianapolis, we put a full room of buyers and sellers together. Right, two two different rounds, a clock, breaking news, real money on the table, and we didn't record that session, but we promised we would run it back again live here. And this is that session. So today is gonna we're gonna have two different negotiations today, not one. We'll have a round one, which will be our annual contract renewal. Round two is gonna be fast forwarding 90 days when the seller sends an increase letter. Stop me if that sounds familiar from from this year. Same buyer, same seller, same five resins. One thing changes between the rounds, and I'm going to let you figure out what that is here. And thank you for the echoing voices comment. We'll try to take care of that here in a second. Some just quick ground rules. Everything you're about to see was written for the session here today. The companies, the producers, the index, the prices, the news-they're all illustrative, deliberately and intentionally. Not anyone's view of the market today. The structure is real, right? Nobody, nobody on this call is going to be talking about real prices or real suppliers. And please, let's keep it that way in the chat. Speaking of the chat, let's do use it the the whole time here. Tell us what you would do in these scenarios. Tell us when one of us has made a mistake. We'll come back to the best ones, and we've saved some some real time for some questions at the end. So I'm going to be the seller, having satin those shoes for most of my plastics career. Tyler, you're going to be the buyer man. I know that's a seat that you are comfortable in.

Speaker 2  02:41
Over a decade of purchasing resin, happy to be here together to do it again. I'm the director of engineered resins here at ResinSmart, and as I mentioned, I've been buying resin for a little over a decade. So this is a place I'm pretty comfortable with, and I'm excited to to do another simulated negotiation, the one that we did at the MAP conference was a ton of fun, and happy to do it again here today. So first, let's let's see who all's here.

Speaker 1  03:12
All right, we're going to use a couple polls during the session today. So, if you wouldn't mind, kind of looks like we've got a nice selection of folks here. Folks that buy, folks that sell, operations love the love the something else too. I was I was wondering how many we would get there. So looks like it might be tilted a little bit your way, Tyler, which is just the way I like it.

Speaker 2  03:41
Bill four buyers. built by buyers, built for buyers. So, so as we go through this, and as you follow along, at the end of each round, I think what the question-if you had to ask one question to yourself-it would be, where did the money move, and what made it move? So, here's the case in 90 seconds. I'm the purchasing manager at Harbor Point Molding, a custom injection molder in the Great Lakes. About eight and a half million pounds of resin a year, and I was promoted eight months ago. And my CFO has handed me a savings target of $300,000 a year. Michael's my account manager from Ridgeline Polymer Supply, our distributor. There's five lines that we're going to go through in order of spend, which is basically that polypropylene homopolymer at 6 million pounds, the polypropylene copolymer FDA grade at 1.5 million pounds, ABS at half a million, nylon six 300,000. Those are priced the same as you can see, and then finally a 30% glass filled polypropylene at 150,000 pounds. So you can see the prices here. You can see what a penny gets me as I try to work towards my target of 300,000. Now, one other thing I have in my camp is that I have a competing quote on the homopolymer, and I have one engineer resins requalification that my engineering team has allowed me to do. So, on that list, I can't just go requalify anything. But if there's one really tough negotiation, I do have the opportunity to to get engineering involved and walk away from one of those lines. So, in this, it's October seven. As always, the contract renews on october 8. So we have to get this done today. And with that, we're going to get started with our our scenario. You ready, Michael?

Speaker 1  05:43
Tyler, I'm always ready. Let's let's get going,

Speaker 2  05:46
as a seller would be. So, all right, let's get into it. So, Michael, thanks for making the time today. And before we get into it, I wanted to ask, how was the trip back from Indy?

Speaker 1  05:55
Well, you know, Tyler, it was long, but it was good. If you can hear, my voice is a little scrag, little scraggly, right? It happens after trade show weeks. We hit a little weather getting back to Dallas, but you know, all things considered, plenty of people asking about Harbor Point. Actually, you guys are pretty busy.

Speaker 2  06:13
Yeah, we are, we are, which is part of why I I need this one to go well. This negotiation, and I'll be straight with you, my CFO has given me a savings number this year, and it's it's going to be difficult to hit. It's it's it's big, and I need movement on this renewal.

Speaker 1  06:29
One of the things I always like about you, Tyler, is that you're you're straight with me. And listen, Harper Point, one of my most important accounts in my region, and my plan is to absolutely keep it that way. Now, before we get into the real numbers here, I want can you help me understand besides price, what matters to you this year? What's important to you guys?

Speaker 2  06:51
Well, first of all, we have to have supply, and whatever we negotiate here, price wise, goes out the window if a line shuts down. So supply has to be perfect. It has been. Thank you for that. But beyond that, it's what's important to me is hitting my bonus, and to do that, I have to hit this number my CFO gave me.

Speaker 1  07:09
Gotcha, and I want you to hit that bonus too, so I understand completely, Tyler. Where would you like to start today?

Speaker 2  07:15
Well, let's just go down the list. We'll start with the polypropylene, as it's our largest line item. It's 6 million pounds of 78 cents. I got a quote from another distributor that's meaningfully better. So I'm going to need you at 75 cents.

Speaker 1  07:33
Another distributor, Tyler. You know who's it from, if you don't mind me asking. One

Speaker 2  07:41
of your competitors, but it's a real distributor and it's a real number, and it's and it's below 77 cents.

Speaker 1  07:52
Okay, not not my favorite answer, but I believe you, right? Real distributor, you're not the kind of guy that would make stuff up like that. So, let me ask you this question: How long is it going to take you guys to qualify that type of material in your plant? Last time we had a similar conversation last spring. Your team, you know, you took almost the entire quarter to get that done.

Speaker 2  08:20
Quarter's not that long, but we'd figure it. We have some pretty sharp engineers that have joined the team, so it we'd figure

Speaker 1  08:28
it out. All right. Look, understood. 75. Just it's not a number that I can get to. It's certainly not on a fixed basis, Tyler. What I'd like to talk about, in addition to the actual number, right, is the price mechanism how we price it. Have you guys looked at going index-linked, the Midcon Polypropylene Index, right, plus a fixed adder? When the market comes off, it's gonna you're gonna look like a hero. You're gonna follow the market down.

Speaker 2  08:59
Sure, but when it goes up, we don't we don't even talk about it. I just get a price increase. So,

Speaker 1  09:04
well, I mean, right? It works both ways to me. Like that's the definition of a fair a fair relationship. That if you're going to insist on fixed, the the best I can do is 77 cents

Speaker 2  09:18
for 12 months.

Speaker 1  09:21
Oh, sorry. I don't try to do this, but 77. That's if we can do two years, Tyler. I need 24 months. That allows me to go back and talk with Corbecks with some certainty, and that without that, I can't get to that number.

Speaker 2  09:41
We've been buying this polypropylene for a long time, so I'm I'm sure I can live with 24 months if if we get the price right.

Speaker 1  09:48
All right, all right, then 77 for for 24 months it is. Tyler, breaking news, right? Corvex Petrochemical announced. Is a three cent price per pound increase on all polypropylene grades, effective October one. That was a few days ago, Tyler. And look, listen, I I told you that this was coming, man. That there it is, and it's three cents, right? And that's landing to me on october 1, which is in the past, right? If you're fixed at 77 for two years, I'm going to eat that on the index. You're you're only going to pay if it actually shows up, right? And honestly, this is the way that we can protect both of us in this scenario.

Speaker 2  10:35
But if it doesn't stick, then I don't pay it.

Speaker 1  10:39
Yeah, exactly, exactly.

Speaker 2  10:42
All right. So, all right. So we'll do indexed linked starting at 77 cents, and then that adder will be locked for the term of the 24 months.

Speaker 1  10:53
Tyler, that's a done deal, man. Index linked 77 baseline. That's the starting point, and we got 24 months. Should we tackle the FDA one now?

Speaker 2  11:06
Yeah, let's. All right, 70. All right, let's let's talk the FDA copolymer. So 96 cents. I need something there too. I mean, if we can move on the homopolymer, I got to be able to move on the copolymer.

Speaker 1  11:18
Yeah, and you would think so, Tyler. You would think so, but listen. This is this is Bentian, right? We're the exclusive distributor in this territory, and we have it documented. It's in the CRM. This is on your customer's print. There isn't anything I can do on this grade right now. There's there's just nothing.

Speaker 2  11:38
Nothing. Zero.

Speaker 1  11:39
Nothing. I mean, I'd rather just be straight about that and move on to the next one. I don't want to waste your time.

Speaker 2  11:49
All right. Well, I appreciate that. Let's just keep. We'd circle back to that maybe. But let's let's keep going. Let's talk about the ABS and the nylon. Both of those came over with our acquisition in 2023. They've both been at $1.93, and I don't think anyone's really taken a close look at those. So I'm going to ask. Let's go. How about a nickel on both of those?

Speaker 1  12:14
Okay, a nickel on both. Listen, these markets are both meaningfully tighter than the polypropylene we just talked about, nylon especially right now, caprolactam, which is that key feedstock. It's been all over the place. That graph looks like a yo-yo, and we're we're on the way up right now. I can do three cents on on both, which would put them both at dollar 90 per pound.

Speaker 2  12:41
Three cents. I really need five. I, I could settle for four.

Speaker 1  12:53
Listen, Tyler, it's got to it's got to be three. But listen, I'm a nylon. We we that price we can make it good for 90 days. That's it. I can't do it for 12 months. I'm already hearing. I mentioned Caprolactam Meridian. They're talking. It's the increase is coming. Just a matter of time.

Speaker 2  13:16
All right. So we'll do three on the ABS and the nylon with a 90 day review for the nylon specifically. Fine,

Speaker 1  13:25
I I think there's another there's another market note coming, Tyler. Spot ABS import offers into the U.S. Gulf Coast two year high. Asian general purpose ABS spot prices are down 4% This month,

Speaker 2  13:43
ABS is at a imports are at a two year high. So, given that you know announcement that we both just heard, what does that do for me?

Speaker 1  13:53
Yeah, I was thinking you might ask me about that, Tyler. And listen, the the honest answer is there's really not much, right? That's that's general purpose ABS from Asia. That's not what you guys have qualified grade that you have is a little bit different, right? And it's not going to change my cost.

Speaker 2  14:16
Feels like it should economically, but I mean, fair enough. It's not the same material.

Speaker 1  14:22
Listen, I know I want to be super respectful of your time, Tyler. We're getting close. Are we good? Are we good to go and get this thing signed?

Speaker 2  14:30
We just got to quickly talk about the glass-filled compound. $2.85. How does $2.85 make any sense when everything else I'm buying is under $2, and some of it's even 77 cents.

Speaker 1  14:44
Yeah, and listen, that's that's a fair question. That's Novarris, right? That's not only do you have a single source element, they've got to make it. It's a compound, right? So they've got some conversion cost in there. There's, it's not just a. Simple as looking at the resin, and listen. Like there's been a rock solid history here. Three years, not one quality issue, not from us, not from the supplier. I really would hate to kind of stir things up. We're we're so close to an agreement here.

Speaker 2  15:19
Nothing you can do further on the 285.

Speaker 1  15:23
It's a great price in the market. I got I sell it to other there. There's other folks out there that are buying it for much more than that, Tyler.

Speaker 2  15:30
Well, that's something I can at least go back and tell my boss. With all right, yeah, we're up against the time here, so let's let's get it signed. Read it back to me one more time. What we have,

Speaker 1  15:40
happily, Homo pollen. right. This is the one that is high on your list. We got that 77 cents, which is linked to the Midcon Polypropylene Index. Two years, 24 months. The FDA copolymer. We have that at 96. ABS is at $1.90. Nylon six is at $1.90, valid for 90 days, and that glass-filled material 285, and everything wrapped in a bow will keep your terms at net 30.

Speaker 2  16:14
Since you couldn't do any concessions on some of those line items, can we at least do net 45? That's going to help our cash flow on our side. It's it's a big push. It's a goal for mine.

Speaker 1  16:24
Man, I I'd love to help you hit your goals, Tyler. But our finance team is really scrutinizing terms right now, and for this for this account, I haven't been authorized. They're they're never going to approve an increase. It's it's got to be net 30.

Speaker 2  16:40
All right. Well, then let's get it done under the time deal. Let's do it.

Speaker 1  16:47
All right. Listen, signed. It's an absolute pleasure to do business with you, Tyler.

Speaker 2  16:54
Yeah. Thank you, Michael. All

Speaker 1  16:55
right. Have a great day.

Speaker 2  16:57
Yeah. You too. That was brutal. If I can do my math right here, that's 80. I think I got 84,000 out of this against a target of 300,000. So I guess I'll have to find some other. You know, and this is breaking character, by the way. This is kind of like timeout here. I'm talking to the audience now. 84,000 is what I got. My target was 300,000, so I'm gonna have to basically go back and tell my CFO, look, we're spec locked on one of them. My sales guy said that we're doing better than the market on the compound. Can't change payment terms. I did get a lower price on our biggest line item, so that's that shows I'm a savvy negotiator. But to get the 300,000, I'm whatever that is. I'm like $216,000 short. So I'm gonna have to find some other distributors or some other project to to fill that gap. And the quarterbacks just announced an increase, and I got index protection on that big line. So that's another defensible thing I can go back to my boss with. So was it a great day? No, but that's one phone call, and I saved $84,000. And say that's it's a decent day's work.

Speaker 1  18:11
Yeah, and and listen from my perspective on the sales side, I was kind of tracking the map there too. I had just under 90 grand as my number of what I gave, but that was from a territory number of almost a $800,000 of margin on this account. I got my two years. I got my index linked on the big volume mover. Right, the 6 million pounds. My nylon is protected. I can raise price downstream, right after that 90-day review, and the ABS. Like we barely moved, we barely gave anything away, and so I don't know if Tyler was going to join me for lunch afterwards. But if not, my boss is certainly going to be taking me out for sushi because I very great result.

Speaker 2  19:03
That's like 12% of your margin that you gave up, and I don't know that that's enough. That's crazy.

Speaker 3  19:14
All

Speaker 1  19:16
right. So now we are out of the roll. Why don't we ask everybody? What do you think? Who won that round? I'm feeling pretty good about where I am at, and I think I'm feeling super good for this. I think every a lot of folks are are on my team on this one, Tyler. So, listen, you can't. I've had real

Speaker 2  19:46
calls that felt so much like this before. That were just you're poking, you're pushing, you're doing what you can, but somehow everything seems like a wall that's that's too hard to hard to climb. Oh, brutal. Yeah,

Speaker 1  20:00
yeah. Most most folks were in on me on on on my side of the fence. There, there were some folks that said both, right? And thank you, Chris, for the for the comment that you know that there there was you know some you you've got some of it right, Tyler. And well,

Speaker 2  20:18
I I did, but the answer to Chris's question is like, why not hold out the 75? Well, that's because like most good buyers, 75 was a little bit of a bluff. My competing quote that I had was for 75 and a half. So, yeah, 84,000 against a $300,000 target.

Speaker 1  20:41
Michelle's spot on there. Yeah, kind of,

Speaker 2  20:43
kind of an L. Kind of got to wear that one a little bit. So where, where the L with the walk away, right? I could have, I could have walked away to that 75 and a half. It was going to take one of my qualification spots, and I wanted to look closer at that 285 because if that 285 is like $1 too high, that'd be a better engineering project. So I had some of these kind of competing goals on my end, and knowing that, like, even the best price, even if like we went to the market and switched at 75 and a half. So now we're talking a penny and a half off of what Michael gave me. Too much risk.

Speaker 1  21:20
Yeah, I agree with what Chris came in there with. You know, too much risk, right? And would have been tough. We've got a couple questions on what could you have done to move the needle, Tyler, in your favor. You know, I think for me it was, you know, you know, it's one of the things you like to say is just the questions, right? You could have asked me some more questions and tried to really kind of pin me down, and I think in round two we're going to have an example of another thing that you can do differently, right?

Speaker 2  21:48
And round one was negotiated without anybody in my corner. Round one was just me with only visibility to my own spend, my own history, my own acquisitions, being an astute buyer and trying to you know sniff out why are these two different things priced the same way? I tried to ask those questions, but didn't get very far.

Speaker 1  22:07
Yep. All right. So I think you know with with that said, we can get into the 90 days later, Tyler. Unless you you had anything else to to kind of wrap there with,

Speaker 2  22:24
I guess I would say if you're just keeping score at home and you're watching like where the money moved and what moved it, as I recommended in this case, you might say where the money didn't go and why didn't it. And I think that in this next example of the of the price increase nomination, I think you're going to see what what better can look like if if someone's in your corner helping you out and giving you a lot more context to confidently push back. Yeah,

Speaker 1  22:53
well said, Tyler. I'm going to put this on the screen here. So we are 90 days from now, the contract has been running for a quarter. Benzene is up, right? Caprolactam is up further. Polypropylene index was up two cents, and this morning, Tyler and his admin team at Harbor Point got a letter from me, which looks a lot like this letter here, effective January one, nylon up 12 cents, ABS up six, glass filled up 10, and on the polypropylene homopolymer adjusted two cents up with no action required. Altogether, we're looking at 200 grand, $201,000 of increases in this letter,

Speaker 2  23:46
which we all I think a lot of us lived through. You know, back in April this year, and it can be so frustrating that you just did all this work to negotiate these prices, and you're tracking along to your annual savings target, and now that $84,000 of benefits going to get wiped out by $201,000 of increase. So, hopefully, this goes a little bit better for me.

Speaker 1  24:14
And then the one the one more thing, Tyler, that I think happened during during that break.

Speaker 2  24:22
Exactly. While I was out of the office, my VP ended up signing an engagement with Resin Smart. I come back, and this time when I'm looking at this price increase, I I have a different letter to look at, which is this brief from Resin Smart that says, line item by line item, are these cost increases real? And what questions should I be asking to drive this conversation? Because a price increase letter is just a nomination; it's just a starting point. So now instead of saying, "Okay, well, I I can go research the marketplace and try to figure out what's happening, well, now I have an expert that's. Says, hey, we got a bunch of questions about why your prices are what they are. We've got some benchmarks here and a target range for you, and we monitor the market to tell you how much of this cost is real and how much of it is just margin hidden in a generic announcement. So it does it does three things. It sorts the letter into real and not real. It gives me a target range for every line, and it's built from cost structures. And it reminds me of the one thing I'd forgotten, which is that the seller asked to change the price. Now everything's back on the table. All

Speaker 1  25:35
right. Before we get into the round two, which I know you are all excited for, want to get the pulse of everybody out there. I'm sure you, many of you buyers were in this seat all year. You just got 200 grand worth of increase letter. What is your first move? Got to accept, protect the relationship, negotiate each increase, accept the real part, and reopen everything else. Take it out to bid. Got a lot of really good answers coming in here. Seems a little bit across the board. I'll call it there. So interestingly enough, negotiate each increase. Top answer: accept the real part and reopen everything else. Take it all out to bid, and you know, accept and protect the relationship. We've got a lot of buyers that have been in those shoes for a little while and know that that amount of increase is not something you can just accept.

Speaker 2  26:46
Yeah, there's plenty of times in my career, and I see it all the time where buyers just accept the letters. So either we have some really savvy buyers on the call, or people don't want to admit that it's come. You know that this is something that happens. So right, that's good. It's good to see. This will look familiar then.

Speaker 1  27:05
Absolutely. All right. Appreciate that, Michelle. We'll get back to you here in a second. Um, we should we should get into it, Tyler. Round two. Are we ready to go?

Speaker 2  27:19
Let's Jump in!

Speaker 1  27:23
All right, Tyler. Hey, it is great to be on the phone with you again. Thanks for for jumping on. I listen before I can see you seething over there, man. I knowing a letter like the one you got from us this morning is is not fun to give. They're not fun to deliver either.

Speaker 2  27:42
Yeah, I got to imagine that your life's not a ton of with all these buyers kind of jumping at you to to make you justify this, and are probably pretty upset. It's one one few times I'm pretty happy I'm in procurement, not in sales, so it's got to be tough. But listen, that's what letters are for. That's why you didn't have to call and just tell me this. And I read it pretty carefully. But here's how I'd like to run this. You've asked to change prices on four out of our five line items. So as far as I'm concerned, we're going to negotiate all five. We're we're back to the starting block on the table. And I want to start with what's real because I do recognize that some of

Speaker 1  28:20
it is. Listen, Tyler, respectfully. man, their increases in those letters-they weren't for all five of those grades, right? There were only four. It's not the time to reopen this whole contract. We we just signed this thing a couple months ago. It's September. Let's let's let it ride.

Speaker 2  28:38
Listen, you asked to change the price. I'm I'm here to talk about that with it. But if you don't want to open the contract, then let's not change the price. Doesn't sound like that's an option. So this this is where we're going to take it, and this is the conversation that we're going to have to have today.

Speaker 1  28:53
Okay, I mean, I guess fair enough. All five lines, as I said, it's it's been an absolute brutal quarter for feedstocks, so I think we should probably start there.

Speaker 2  29:06
All right, let's start there then. So let's go line by line, just like we did for the renewal. Let's start with the homopolymer polypropylene. The index printed up two cents, and now I'm going to pay it. But help me understand what actually moved in your cost on that homopolymer,

Speaker 1  29:24
right? Trying to adjust the chat question here. I'm going to take a quick, quick break here. Small video at the top. Okay. See, did that make it any better?

Speaker 2  29:43
No. Okay.

Speaker 1  29:44
All right. All right. I will. We're have to just keep keep fighting through it. Apologies for that. So we talked about. Listen, I I mentioned Corvex, right? They. Announced three in October. You heard it the same as I did. The index printed. It is what

Speaker 2  30:08
it is, Tyler. I I hear you, but I've also since learned that the PDH units in North America are back online. They're through the turnaround season. Monomers readily available. We're looking at inventory growth over this time, actually, so if inventories are growing, and we're seeing spot transactions that are actually separate from contracts that are on the low side, and we know that the feedstocks are available, so it's not a supply and demand problem. I don't see two cents at all. I disagree with the index on this one. It just doesn't make sense to me.

Speaker 1  30:45
Well, listen, I had real impact on my costs. Corbix got about a penny through.

Speaker 2  30:53
All right, so the index is charging me two cents, or we're agreeing to the index that you're you're going to charge me two cents for a market that only moved one, and I earned that penny. I want that penny back. So going forward, if we're going to keep doing this, I want a review clause where if the index and the market signals are drifting apart by anything more than a penny and a quarter, either of us can call a review.

Speaker 1  31:20
Listen, Tyler. I mean, the agreements we have-they're index based. I'm going to have to take a a drift clause. It's way above my pay grade. I got to go back to to leadership on that.

Speaker 2  31:34
Okay. Well, you should do that. You should go back to leadership and talk to them about that because I feel like I already left money on the table in our last polypropylene negotiation. Based on that's just not acceptable for us, but we'll park it for now. You can come to me on that, there's another breaking news announcement: a major European capital actum producer declares force majeure. Capital Actum spot is up 9% this month.

Speaker 1  32:13
Tyler, did you have

Speaker 2  32:14
interesting breaking news?

Speaker 1  32:16
You're listening to these headlines, man. There you go. I start this conversation out by saying feedstocks have been brutal. They're moving, and the yo-yo is like on the way up this time. That's what's behind the whole letter that we sent to you, man.

Speaker 2  32:34
Yeah, but even that announcement-that's just capital actum, and that goes into nylon, not everything else that's in this letter. So the only caprolactam impact is on nylon. So,

Speaker 1  32:47
well, listen, I'll acknowledge that. I'm not going to tell you caprolactam goes into polypropylene, right? We we both know that it doesn't. But the nylon is real. Meridian has put 10 cents through on us.

Speaker 2  33:02
All right, and I'll I'll believe that our our cost model though puts the the fair price of that increase at six to eight cents. It's not 10. So maybe you did take 10 cents, but that's not what our cost models are showing, including the moving capital actum, I'm only going to accept seven on the nylon effective january 1, and we can keep that same 90 day review as things come back down. But that has nothing to do with the ABS, and they're priced the same. So we're going to go seven cents maximum on that.

Speaker 1  33:38
Eight cents, Tyler. I can't do seven. It's got to be eight.

Speaker 2  33:42
Seven. We're going to do seven cents, and we're not going to fight on nylon. It's the one line where I think that you have a real case, and I'm willing to give you an increase today. But it's going to be seven, and I'd rather spend our time where like the actual money is. I know that you need an increase here. Heard seven. Let's keep moving.

Speaker 1  34:00
Okay, seven, but I keep the 90-day window that we discussed. It is 197.

Speaker 2  34:08
All right, 197. So ABS, your letter says plus six, and that puts us at $1.96. But I have two questions on that. One, what moved in your cost on ABS this quarter, and why was the ABS ever the same price as the nylon?

Speaker 1  34:24
Well, listen. Let's let's take that second question first. I think that's the more straightforward one. That's that's a legacy deal, right? This came over with the acquisition that you guys made, right? So that that's it's just been the history there. Let's go back to your first question. ABS, that market has been very tight this year.

Speaker 2  34:46
I mean, but has it? I mean, the the announcement we heard earlier was, you know, Asian imports were at a high. Domestic pricing was down 4% Our read is that ABS feedstocks have actually been flat. Most of this year, so when I see when I see what you're saying about ABS has been tight, my read is actually the opposite. And and you told me that in when we did this last negotiation that those things didn't change your cost, and I think that's okay. But that's my point: is that if it didn't change your cost. Your cost didn't go up either. So our cost model also puts the fair, like fair market value of this ABS, at like $1 $50, $1.60, maybe. We're at $1 and fair marks with, and have to explain that gap. And I can't do it right now.

Speaker 1  35:48
Yeah, but Tyler, I mean, 151, 60. That's those numbers might as well just be that they're not real. You don't have a qualifying material in your in your portfolio at those numbers.

Speaker 2  36:05
Well, at that at that difference, I might I might qualify an alternate resin. But even then, show me what changed in your cost, and I can listen. But right now, we're way out of market. We're too high, and you're asking for an increase.

Speaker 1  36:21
Look, Tyler, it's just not about the resin, right? You're paying for service from us. We hold inventory for you. We deliver when you need it. Have we one time shorted you in the time that I've been here as your account manager?

Speaker 2  36:40
No, and I value that, and as I said, that's table stakes, and I'm happy to pay for it. But you deliver that nylon on the same truck that you deliver the ABS on from the same warehouse with the same service. So why is the service worth nine cents on nylon and 50 on ABS?

Speaker 1  37:03
Listen. Let me try something here. Okay, I will give you a penny back on the polypropylene 78, not 79. That's where your focus was the last time we talked about this. So that's got to mean something. We hold the ABS at $1.90, no increase. That is real money directly into your pocket.

Speaker 2  37:31
Well, I'm glad that we've worked out this penny on the polypropylene, and I'm absolutely glad to take that. And that's a good negotiation, good faith. Thank you. But the ABS is a separate conversation, and I still can't explain to my boss this huge, seeming margin change in there. And it's about the cost, so I, I need to be down in that dollar $50.60, range.

Speaker 1  37:58
Okay, listen, $1.80, $1.80, that's what I can do. If

Speaker 2  38:03
it's higher than the dollar 65, I still have to explain to my boss that difference, and it's big enough that it's going to trigger a qualification.

Speaker 1  38:15
I I just can't do $1.65, Tyler. I can't do $1.65.

Speaker 2  38:22
Top of the range dollars. Let's call it dollar $68.68. and I get to tell my boss that we're now compliant with the fair market price that we've been given. We're in range. It's not the bottom of the range, but now, now that's something I can stomach for you.

Speaker 1  38:44
All right, and 168, no requalification. 168, and and you stay with

Speaker 2  38:52
us. I can do that.

Speaker 1  38:54
All right, Tyler, I'm getting the I'm getting the notification. There's some more breaking news, Right, a hurricane is brewing. It's off the coast of New York. Right, weather changes normally in the Gulf. It's on. It's up near New York. Forecasters say it could make landfall this weekend. So I just heard it. You heard it. It's all over the news. I have to be very careful with my logistics now. Right as we head into January with this event, it's going to move logistics costs up.

Speaker 2  39:33
Sure. Which which plane is it going to move? Yeah, Michael. Come on, get real here. Nothing is made in New York here, and we our plants are in Indiana. So,

Speaker 1  39:46
okay, listen, the weather is is is a reality, right? And it's impacting some of my other accounts. So, look, and it's worth a shot.

Speaker 2  39:56
Okay, sure. Last line item. With an increase is the glass-filled compound. So you've asked me for 10 cents to get to $2.95. My engineer did a cost build-up of the chemical composition of this, and 70% of it is the polypropylene, basically the same resin that we already negotiated at. So we have a baseline price for that. 30% glass. Glass is up like 3% this quarter, and compounding is normal margin. I mean, the cost buildup on that puts again the fair market price at like $1.95, maybe up to like 225. We're at 285. Again, help me understand that.

Speaker 1  40:43
Yeah, listen, man, I I hear you. That is Novartis, right? That's this is the situation with these guys. It's a single source situation. It's the only qualified grade, man. Again, you might be paying a little bit for the security, but I'll remind you that it's been three years, not one issue.

Speaker 2  41:07
I hear you, but my engineer is also knocking down the door to say that he found two names you might be familiar with: Tri-State Compounds and Lakeshore Polymer Technologies. Both play in this space and compound, and are apparently eager to get out there and take market share. So I've only got one requalification slot this year. I've already committed to not putting that on the ABS based on a negotiation. I'd rather not spend it on this part at all. But whether I do or not, again, and not to just put a stick on everything. I mean, I'd like to give you some carrots too, but it really depends on this number. It's it's again, I have to explain to my boss this gap.

Speaker 1  41:46
Look, man, I I've heard of those guys, and both of them don't have the same track record of three years. I'll just I'll say that, and I'll also say, man, listen, requalifying that type of product, we you and I both know what this goes into. It's not going to be quick for you guys. You're looking at a minimum of nine months and a lot of your engineers' time. Let's just stay where it

Speaker 2  42:13
is. Understood. But I got to play the long game on this one. And if it takes nine months, it takes nine months. I just got promoted. I'm going to be here a little while, so I got to you know if I'm going to be here for two or three years, then guess what? I'm going to experience the benefit of this when it comes through next year. And frankly, with the targets my CFO is is giving me, it's already in the pipeline for next year. Like we have a project associated with this grade, whether it be negotiation or qualifying an alternate, and we have to get the value for that. So if it's next year, it's next year. But if it's going to be now, then I need a price.

Speaker 1  42:48
All right. Okay. Listen, Novartis, they did pass four cents through to us on this on this grade.

Speaker 2  42:57
Okay. So then four cents is the conversation, not 10,

Speaker 1  43:02
yeah,

Speaker 2  43:04
and not starting from $2.85 either. I already said that my engineer thinks he can get this under $2 a pound.

Speaker 1  43:14
Listen, I I think we can do $2.40. I hear what you're saying. We want to keep your business $2.40 is where it is.

Speaker 2  43:24
That's going to for sure limit the value of doing a requalification. But 225 is where the questions stop.

Speaker 1  43:34
225. I'm guessing that's probably the top end of your range, right? That you've got identified for this,

Speaker 2  43:43
and you'd guess right.

Speaker 1  43:46
Great, lovely, fantastic. All right, should we tackle the FDA copolymer?

Speaker 2  43:55
FDA copolymer. So, what changed in your cost on that one?

Speaker 1  43:58
Okay, this one's easy for me. Nothing, and still exclusive. It's still the same situation. It's why it's not in the letter, right? We're not moving your price on this one.

Speaker 2  44:13
All right. Well, fair enough. Tough grade to change. Same price. Difficult market. We'll keep monitoring it and come back when things change. So, and all

Speaker 1  44:35
right,

Speaker 2  44:41
time where we went.

Speaker 1  44:43
Okay, I will read it back to you here. We've got Homa Palmer 78 cents.

Speaker 2  44:50
Be a great.

Speaker 1  44:52
Ooh, I think my look. My internet is acting up a little bit at the end of the call when you're asking me to wrap it up. So, homopolymer 7078 cents

Speaker 2  45:05
now.

Speaker 1  45:06
Okay, I tried to you know I can't hear you. I don't know. All right, we do have a deal though. Homopomer 78 cents index bringing up 24 month term. FDA copolymer 96 cents ABS at 168, nylon six at 197. I get my 90 day review still. Glass fill compound 225. This is all effective January one. Do we have a deal?

Speaker 2  45:43
Deal. I'll take it.

Speaker 1  45:49
Okay, great. We do. Listen, it's signed from my end. Listen, I hope you and the girls have a great Christmas. Merry Christmas, and we'll talk to you next year.

Speaker 2  46:03
Same to you and yours, Michael. Thank you. And we are out. So scoreboard looks a little different in round two. Round one it was eight four. More than you know, $200,000 more in price resets on the ABS and the compound. So plus the $120,000 of the 201,000 letter that I didn't have to pay. So if you look at the the stack up on how we did on this second round. Not only did opening the contracts enable us to ask deeper questions with a better market insight of where we should be, I was able to do it. Yes, I had to use those alternate qualification threats. Of course, that's sometimes that's the only thing that's really going to move the needle. But to do so against a credible alternate and a credible price range, and if you were to look at Michael's margin that he had to play with, the numbers that I was throwing out there were were numbers that he could give. It was not. I wasn't asking for $1 and then just anchoring low and figuring it out, I think he knew that the prices that I was asking for are realistic. It was an informed buyer that was pushing back on

Speaker 1  47:30
him. Yeah, and the thing that I would add from my angle, and this is for those of you on the seller side that's out there, I certainly gave more in round two, but I would argue that I didn't lose. We got a deal signed, right? I kept every pound, which is what a lot of sellers are incentivized on, and kept the two-year commitment on the core product. The index is still there. Yes, there's a clause now to discuss margin drift, but I still kept that right, and the nylon is is there. I got paid off on the increase because that was real, and I got that covered. The ABS stayed, and it was above my walk line that I had right before the call with my leadership, and I still kept about 60% of the margin on the account. From my perspective, I think we could both walk out of the conversation and feel good about what we did. From my standpoint, this is what good negotiation looks like.

Speaker 2  48:39
Yeah, agreed. And I think that it's important to remember, you know, this is the map that you couldn't see, right? This is the this is where the seller's floor actually was, and you can see on a few of the examples I gave them, like with ABS, I said maybe $1.50 would be the floor. Salesperson is looking at the sheet and seeing his own floor or her own floor. That's where things become very powerful because now you know where the bottom is. It's almost like you both now reading off of the same sales sheet, right? That's got to be something that that puts the the seller in a very uncomfortable position, and what you can see now is that look how if you were showing that it was like the compound had quite a bit more margin in it, and so did the ABS than the nylon and the FDA. So even though I pushed back on the FDA and I push back on on the nylon. You can't get the floors are different, and those questions that I ask reveal different savings for different line items. Sometimes you really are stuck. Sometimes the salesperson doesn't really have that much to give, but other times they absolutely do. So I guess Michael in round one. What was the question you were most afraid that I would ask?

Speaker 1  50:04
Yeah, I think that's great, Tyler. That question. Well, one of the things that I had on my list was the commitment, right? The 24 months, and what does 24 months do for you? Is the question you didn't ask me that, you know. If you had asked, I would have had to talk about you know the tier with the supplier with Corvex. Two more cents on that grade, you know, unlocks the take or pay agreement. And the term you gave me already, you know, earned you the three cents on the FDA grade, and you never asked for either. That was over 150 grand to me, and you gave me the term term for free, which I appreciated, man, because that that's a big that's a big thing to take back to leadership, right? I guess since you asked one of my

Speaker 2  50:58
favorite negotiation one of my favorite negotiation tips is never give something away without getting something in return. And in that regard, you know, you said 24 months, and I was like, "Yeah, sure. Like, we'll probably keep you buying resin together. Let's do it. Instead of, "Oh, I hear that you need something. Well, what do I get out of that? Or what does this do for you? And therefore, of what it does for you, what do I get? So there was a total miss there.

Speaker 1  51:25
Yeah, I had a question for you before we turn it to the audience, and we'll check the chat here in a second. There was an obvious difference in the data that you had, right? You know where it came from, but you had a different understanding of the market. I want to ask you, what did you do in round two that you could have done in round one if there was no data change element that we that we talked through?

Speaker 2  51:55
Right. So if I didn't have Resin Smart in my corner giving me a full negotiation brief, almost almost selling like telling me what's on the seller's side. The truth is, most of it. If you don't have this, there's a lot to take away here. I asked what changed in your cost. I asked why two different resins had the same price. I put every line item on the table, and the data gave me the ranges, and most importantly, the confidence-the confidence to push and ask and stay quiet and watch you kind of wriggle as that, you know, margin. And enhancing. If you don't have the data itself, you can still ask enough questions and continue to press in negotiations to get there. But one more, because a lot of you buy on an index. You know, I took the index in the first negotiation, somewhat because of a headline, right? Like, oh, they're announcing a price increase, and I'm not sure how to negotiate against this price increase in the marketplace. But the indexes are going to monitor it for me, and the indexes didn't beat me, but but nobody was watching the gap between what was happening in the marketplace and what the indexes were were publishing-that market drift-and that's an entire job. Somebody has to be paid to do that all the time.

Speaker 1  53:32
Yeah, you're you're spot on with that, Tyler. One thing I want everybody to take away, and this is something that you did, Tyler. You asked a pretty powerful question around two two different times, right? What changed in your cost? And there were two different answers, right? That I gave you on the ABS, like that question unlocked 22 cents a pound on the FDA copolymer. I gave you like the honest straight scoop, right? And there was no savings, so there was the the same question, but it really two very different results based on the situation in each grade.

Speaker 2  54:18
And three questions for any headline or increase letter that I write down. If you're still with us, it would be: Is it actually in the seller's cost today? Is the feedstock that they're referring to for sure in this grade? And how much of it? And how much of that moves cost? And finally, has this actually held up in real transactions In the marketplace, brokers, traders, big commodity movers, and if the answer is no, then this is a talking point, not just a price.

Speaker 1  54:53
Before we close, Tyler, we have five more minutes here, and we've got a lot of really great dialog in the chat. Here, really appreciate the slippery broker comment. So I'm glad that I can slip into that and perform. There was a really good question on how would you argue for additive products, right? Our scenario talked a lot about polypropylene, ABS, commodity producers, additive products have fewer producers. Some products which customers have already spec'd in. We think about things like Master Batch, probably things Tyler in this scenario that were in your tail and maybe we didn't even talk about from a contract standpoint. You got any thoughts there before I chime in with mine?

Speaker 4  55:50
Well,

Speaker 2  55:51
opaque in nature. I think the key is knowing about how much they seem to have moved, which you can derive from publicly, you know, available monomer data and trade flows, kind of back into a percentile of how much things have been changing in all those additive markets. I would argue, and knowing how much of that additive is in the actual chemical composition of your grade, we'll be able to give you a range of ammonia trixides example of this. If animal trioxide increase, what does that actually translate to for your cost?

Speaker 1  56:43
Yeah, that's a that's a great great answer. Is almost verbatim what I was going to say, Tyler. So thank you for that. We do have another question here in scenario two. What's the best way for a buyer to tell whether a supplier's requested price increase on the resin is actually justified versus an opportunity to expand margins.

Speaker 2  57:10
If I if I heard your question right, it's kind of the same answer, which is really knowing what's going into the monomers and the productions and the energy costs of your your specific skew, and being able to track that. I think one thing that we're seeing in the marketplace right now is, you know, if we see feedstocks have a big spike and a bunch of price increase announce letters come out, right? We kind of do the math on it. We say, okay, this is more or less fair, but then prices dip down over the course of like 30 days in the feedstock market, and then they rock it back up, and you get another price increase letter. It leaves you scratching your head a little bit. Like, well, my price didn't go down when the feedstocks came down, and now they're going up a second time. Sure, it seems like yes, feedstocks are going back up, but I never really got got my decrease. So it's almost like you went up, up, up, stayed flat while you know feedstocks went down, and now that they're climbing again, we're just going up again. So you never really get to buy the dip, so to speak, which is very frustrating.

Speaker 1  58:11
Yeah, I think that's a great answer, Tyler. And I was going to just chime in and add that yes, it can be very difficult for all of the different types of resins that are out there to keep track of which feedstock, right? What is oil based? What is natural gas? Having that documented and mapped out for you by your SKUs can allow you to better sift through the answer to that question, right? What's real and what's What's noise? We are up against the time slot. We've already had a few people had to bail for another meeting, so I want to take this opportunity to thank everybody again for joining. Just three quick things before you go: you're going to get a recording along with the five things to watch and those three questions that Tyler mentioned for each increase letter. Number two, we're going to send a brief that Tyler used in round two, which is what our benchmark assessment can help produce for your grades, your volumes, and your channel. Obviously, that'll be a fictitious illustrative example. That would be the best way to start with us if you're interested, and in the chat you can grab the link to what that process will kick off for you. And I think third was just again to say thank you for your time, and we're going to be doing this again. So keep keep keep tabs with us, Tyler. Anything else to add before we close?

Speaker 2  59:42
I would just add what our colleague Kevin Macaru always signs off with, which is purchase wisely.

Speaker 1  59:50
Indeed, thanks everybody. We'll see you next time.


Transcribed by https://otter.ai