NEW YORK Steel
importers must offer more risk management services to customers
in order to compete with domestic suppliers, members of the
board of the American Institute for International Steel (AIIS)
said during an AMM-led roundtable at the Steel Success
Strategies XXVIII conference in New York.
The conference is
sponsored by AMM and Englewood Cliffs, N.J.,-based
World Steel Dynamics Inc.
Long lead times and
buyers who are wary of todays uncertain economic
environment have made selling imported steel increasingly
difficult in recent years.
fundamental metamorphosis in the way business has been done and
the way business is going to be done. The days of the big
traders are coming to an end. With all the mergers,
acquisitions, supply-side and sales-side changes, its
created a very different environment for traders to be in,"
Fremak Industries Inc. president and AIIS director Leon
Goldenberg said. "There are less mills to buy from and less
customers to sell to. In addition, customers no longer want to
be six or 10 months out."
Lead times have been a
major factor for buyers, particularly as domestic material on
certain products like hot-rolled coil can be as short as two
weeks vs. months for imported material. Buyers are also
concerned that by the time foreign material arrives, market
prices might have taken a nosedive, causing inventory to be
The trading community
can ameliorate that risk by removing more of the
"The risk management
aspect is the biggest angle of this thing. Buyers are still
wary of long lead times because domestic lead times are fairly
short," according to John D. Foster, chairman of the AIIS,
president of Kurt Orban Partners LLC and managing director of
consultancy Partners in Steel International LLC. "The trading
industry is having to reinvent itself and bring a lot more
value, which includes trade services like financing assistance,
logistics, risk management to help customers run their business
increasingly bringing in foreign material and holding it in
depots or warehouses for specific customers until they are
ready for delivery, Foster said. That way, foreign material can
compete with domestics on lead times. Traders also are
increasingly value adding steel, including cutting, slitting
and coating the product, he added.
is a subset of risk management. Were being asked to bring
a value-added element, which helps customers manage inventory
better," he said. "Weve had to evolve a little bit for
the benefit of the traditional customer base."
Much of the difficulty
in recent years is due to the recession, which has caused wild
fluctuation in pricing. Once demand returns, which some hope
will be marked by a return of nonresidential construction at
the end of 2013 and early 2014, the future could look just a
"Another element to
this is that the driving force of these changes is a macro
issue," AIIS president David Phelps said. "If you look back
prior to the great recession, back to 2006, we had over 40
million tons of imports. Whats happened since then are
these mini-cycles. Nonresidential construction is still so
weak, and you have to have this leg of the stool."