Even if they use a euphemism like “market adjustment”, the recent steel surcharges announced by ArcelorMittal, US Steel, WCI Steel and other mills feel like a price hike to buyers. Many companies were taken aback by the unprecedented move, which jacked up prices they thought were contractually locked in place. But in this market - where steel is a very hot commodity - few buyers think they have any choice other than to take it on the chin until the market cools.

We can have a bit of sympathy for US producers since their costs for raw materials have risen substantially in the past year and they’re feeling the heat from China and other mills abroad. But a great deal of the price increases stems from simply cashing in on the laws of supply and demand. After years of hard times, they’re enjoying the good times while they last.

But even in this challenging environment, there are some things you can do to help control costs, both in the short term to deal with current cost pressures and in the long term to better prepare yourself for the volatility in the market.

Short term, you need to know your cost drivers. The steel price from integrated mills should correlate closely with the price of iron ore. And the price from a mini-mill should be tied closely with the scrap price. Any deviation from that is typically due to mills opportunistically following the price hikes of their competitors. For example, despite no change in the scrap price, a mini-mill will raise prices to match the hikes of integrated mills (which are reacting to iron ore markets). Integrated mills are guilty of following scrap prices as well.

It’s Econ 101, really, with firms charging what the market will bear rather than reflecting the costs of their inputs. But that doesn’t mean you can’t push back on your suppliers. Or better yet, anticipate the next bump in prices (or “surcharges”) and stock up accordingly - literally by filling warehouse space with steel and contractually by locking in future contracts. You’re obviously limited by space and budgets, but it’s certainly a way to soften the blow.

Long term, in the future when you’re sourcing steel you should negotiate the full cost rather than base price. There’s no reason to focus only on locking in a low “base price” when the fine print gives your supplier other avenues for raising prices. Make sure surcharges are on the table during negotiations, so they don’t surprise you down the road. In fact, you should include everything that feeds into your full costs (base price, surcharges, shipping, etc.). At the end of the day, a dollar saved is a dollar saved, whether it comes from “surcharges” or the base price.

Tom Arbogast is a Category Manager for Metals in Ariba’s Global Services Organization. Mike holds a B.S. degree in Mechanical Engineering from Lehigh University and has several years of experience leading global sourcing and supplier discovery projects.

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