Stainless steel producers should sue customers who cancel
orders when nickel prices fall, London Metal Exchange chief
executive officer Martin Abbott told delegates Sept. 4 at
AMM sister publication Metal Bulletins
12th International Stainless and Special Steel Summit in
Stainless steel mills
charge their customers a monthly alloy surcharge to cover the
price of nickel and other raw materials.
distributors, direct customers of the mills, often cancel
orders when nickel prices fall to avoid holding material that
carries an alloy surcharge based on a higher nickel price.
"Compared with copper,
primary aluminium and zinc, there is a lack of contract
discipline and that needs to be solved," Abbott said. "There is
a simple solution, but its not painless: Someone has to
sue a customer. That tends to sort it out."
participants argued that any mill that cracks down on customers
will give its competitors an advantage.
"No one wants to be
the first to sue, but producers must stand together on
discipline," Abbott said on the sidelines of the conference.
"If others say come to me instead, they are
perpetuating the problem."
Customers can choose
from a range of pricing options available to consumers of base
metals, such as copper, he added.
"Customers can get
tremendous flexibility and predictability. You can finesse this
by introducing flexible pricing, fixed pricing or blends of
options that all amount to flexibility and offer an advantage
to planning business and reducing uncertainty," he said.
A version of this
article was first published in AMM sister publication Metal