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Severstal offers firm price options, hikes tags

Keywords: Tags  steel prices, Severstal North America, Dearborn mill, Columbus mill, sheet, firm pricing option, Catherine Ngai

NEW YORK — Severstal North America Inc. has introduced new firm pricing options for quarterly and six-month spot buying of sheet products.

The Dearborn, Mich.-based steelmaker said in a June 14 letter to customers it was instituting a firm pricing option extra of $1 per hundredweight for quarterly buying and $2 per cwt for six-month buying. The quarterly and six-month options don’t include published extras.

"These options reflect producer price risk and are valid only when the current published base prices are used," Thomas M. Marchak, Severstal’s vice president of commercial, said in the letter. "Severstal is also reviewing various other pricing options, including raw material based or indexed to the change in published price indices."

While Severstal declined to comment, customers of the Russian subsidiary indicated that the options are a move by the company to separate contract and spot purchasing, which buyers said have become muddled in recent years due to contract discounting.

"What’s become clear to me is that there’s a total distrust by the spot buyer because larger spot buyers have received the same benefits as contract buyers," one southern service center source said. "The mills have taken the bigger players in the spot market and given them contract deals. It’s become an uneven playing field."

The pricing move is more likely to affect customers of Severstal’s Columbus, Miss., operations rather than its Dearborn facility, which traditionally is tied to long-term contracts with automotive customers.

Others were more skeptical, however, saying that Severstal’s spot pricing options likely wouldn’t be replicated by others, making it difficult to become sustainable industry wide, due to specific market fundamentals. While the recent price hikes by domestic mills seemed to have gained some traction, some maintained that the higher transaction prices are likely temporary due to inventory restocking, summer outages and labor negotiations, which would be resolved closer to the end of the summer.

"It’s interesting, but I don’t know if it really matters," one Midwest service center source said. "Business is going to dictate what happens in the marketplace—supply and demand. For me, I’m not too concerned."

Meanwhile, the steelmaker followed the lead of other major domestic steel mills by increasing its minimum base prices for sheet products to $31.50 per cwt ($630 per ton) for hot-rolled coil and to $36.50 per cwt ($730 per ton) for cold-rolled and hot-dipped galvanized, effective immediately, up by $1 per cwt ($20 per ton) from prices set May 23 (, May 23).

ArcelorMittal USA LLC, Chicago, announced June 13 new minimum base prices of $630 per ton for hot-rolled coil and $730 per ton for cold-rolled and galvanized product (, June 13), and Pittsburgh-based U.S. Steel Corp. and Charlotte, N.C.-based Nucor Corp. reportedly made a similar move (, June 14).

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