More mills expected to stop CRU discounting

Apr 17, 2013 | 04:53 PM | Corinna Petry

Tags  CRU index, ArcelorMittal, hot-rolled sheet pricing, discounting, steel mills, steel distributors, Corinna Petry

CHICAGO — ArcelorMittal USA LLC’s announcement that it will cease selling hot-rolled steel priced off a discount to CRU Group’s index could see strong support from other steelmakers, sources said, noting that the discounting practice has nearly destroyed the flat-rolled market for producers and distributors alike, with no one getting a decent margin.

"(ArcelorMittal) should be applauded for this because ‘CRU minus X percent’ is destroying the value proposition in the distribution business, and probably in the mill business, too," one Ohio distributor told AMM. "If you are a mill, you completely destroy your franchise (selling at a discount). ... There is no more spot market. The spot market is CRU minus."

A number of market players have been expressing discontent for some time with the established practice in which mills sell steel at a percentage discount to the CRU index number, rather than at the actual listed index price itself, sources said. The Chicago-based steelmaker appeared to be the first to publicly do something about it, however, telling customers in an April 16 advisory that its sales team will no longer enter into any new agreements based on a discounted CRU and suggesting a general desire to move away from index-based pricing overall (amm.com, April 16).....





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