Steel mills mull options as talks heat up

Aug 22, 2013 | 06:29 PM | Catherine Ngai

Tags  steel, CRU minus, price discounts, ArcelorMittal, Severstal, Nucor, Tom Marchak AK Steel, steel contracts catherine ngai

NEW YORK — As negotiations laying the foundation for next year’s flat-rolled steel contracts kick off, the market is attempting to measure how committed U.S. mills are in their pledge to bring the practice of discounting off an index to a halt.

Contracts negotiated between U.S. mills and buyers on a fixed duration, tonnage range and price basis are commonplace. But in recent years the rise and spread of "CRU minus" deals—using a specific CRU Group indexed price minus a certain percentage—has led to a practice that mills claim is eroding sales margins.

As parties begin discussions over what shape contracts will take next year, the pressure is mounting to find some middle ground between buyers, who expect to receive an incentive if they sign a contract, and sellers, who have pledged against offering the same discounts.

"I understand where buyers are coming from, but the advantages have gotten way out of line and been abused," Thomas Marchak, vice president of commercial at Severstal North America LLC, told AMM. "There needs to be discipline across the board. The mills aren’t making money, and where the industry has gone isn’t fair. We’re not going to subscribe to that philosophy anymore."

ArcelorMittal USA LLC, Nucor Corp. and Severstal North America each informed customers in the spring that they would no longer enter into any new agreements based on a CRU discount (, April 18). ....

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