Steel mills mull options as talks heat up
Aug 22, 2013 | 06:29 PM
| Catherine Ngai
NEW YORK As negotiations laying the foundation for next years 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" dealsusing a specific CRU Group indexed price minus a certain percentagehas 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 arent making money, and where the industry has gone isnt fair. Were 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 (amm.com, April 18). ....
To access AMM's full content, please log in below. If you do not have an AMM account, we invite you to take a free trial or subscribe below.
Already a registered amm.com user?
Access to amm.com editorial content is granted only to paid subscribers and trialists. If you do not have an active account in your own name, please either subscribe or take a trial and you will have instant access to amm.com content. Sharing your login credentials with individuals who are not subscribers represents a violation of AMM copyright.
Every morning, every minute no matter how often you follow the markets, there's an AMM subscription to fit your needs.
Not sure if you are ready to invest in a subscription right now? Take a free, no-obligation trial. Start your free trial today.