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Slow progress seen on 2014 contracts

Oct 23, 2013 | 06:09 PM |

Tags  steel contracts, contract negotiations, Nucor, CRU index, index-based pricing, Catherine Ngai


NEW YORK — Contract negotiations for 2014 are moving slower than expected as buyers wait to decide how much discipline mills will have in moving away from index-minus pricing, steelmakers and buyers said.

"We’re seeing all the big boys sitting on the sidelines right now inundated with quotes, but they’re not doing anything," one Midwest service center source said. "Everyone is scrambling to see who will take care of them and find the best deal possible. People are still wondering if this is all going to happen."

U.S. steelmakers are said to have largely remained disciplined in attempts to move away from discounting (amm.com, Oct. 23), although many service centers and end-market consumers, especially larger players, remain uncertain and unwilling to believe that they won’t be exempt from the pack.

"I don’t know what the mills are expecting. They’re the ones who were offering 5-, 6-, 7-percent discounts, and suddenly turning around and saying ‘we’re not doing it anymore,’ " a second Midwest service center source said. "I’m assuming things will move slower."

Traditionally, the bulk of heavy negotiations are expected in the mid-November to year-end range, although the pace of contract discussions was underscored last week during Nucor Corp.’s third-quarter earnings call (amm.com, Oct. 17).

Market sources reported that other mills have remained vague in their contract discussions, offering unattractive firm pricing options at quarterly or six-month fixed numbers with no rebates or extra incentives.

Given this lack of competitive appeal, some buyers wondered whether moving to more spot business could be a better bet (amm.com, Oct. 23).

Others feared, though, that given slower discussions, mills might scramble to lock in certain tons and break from the ranks.

"The mills are offering me no discounts—and why would I commit to that? No one is budging and they’re all sitting there and holding the line with this tough guy approach," a third Midwest service center source said. "But it’s like the game of chicken. At some point someone is going to break soon, and I’m getting nervous that the mills will cave."




Latest Pricing Trends Year Over Year

Poll

After witnessing the pace of steel plant idlings and worker layoffs during the first half of the year, what is your view of the second half of 2015? (choose one)

No matter what else happens, layoffs and shutdowns, etc., have nearly or essentially stopped for the year.
The environment will change little and the pace of layoffs will continue at a similar rate as the first half of 2015.
The environment will change little yet the pace of layoffs will begin to slow slightly to moderately.
The environment will change little yet the pace of layoffs could exceed the rate seen thus far.
The environment will improve slightly to moderately yet hiring and plant restarts will not resume this year.
The environment will improve slightly to moderately, with hiring and plant restarts commencing.
The environment will improve dramatically yet hiring and plant restarts will still be negligible in comparison.
The environment will improve dramatically yet hiring and plant restarts will only be slight to moderate.
The environment will improve dramatically, with hiring and plant restarts occurring nearly in tandem.


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