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Ending steel discounts challenging: Ferriola

Keywords: Tags  Nucor, steel discounts, John Ferriola, Evraz, hot-rolled, plate, catherine ngai

NEW YORK — Negotiations over 2014 steel contracts have remained "challenging," particularly as a move away from index-based discounting has made progress slower than normal, Nucor Corp. president and chief executive officer John Ferriola said Oct. 17.

"I won’t speak for the rest of the industry, but as we talk about CRU and CRU minus, we at Nucor recognized that the pricing mechanism was not compensating us for the quality, service and on-time deliveries that we provided to our customers every day," Ferriola said during an earnings conference call. "We thought it was necessary to change that. As far as how it’s being received, it’s certainly been a little challenging."

The Charlotte, N.C.-based steel producer told customers earlier this year that it would no longer enter into discounted index-based contracts (, April 18).

However, the move away from discounting has been somewhat taxing, Ferriola said. "Today, our contracts are going a little slower than normal. But we are making progress and our customers seem to be understanding the need to make a change. We are moving away from a CRU-minus pricing mechanism or, for that matter, any index-minus pricing mechanism."

Evraz Inc. North America announced earlier this week that it will idle its Claymont, Del., plate mill as a result of subdued market conditions and competitive imports (, Oct. 14), which Ferriola said had resulted in Nucor seeing "an incremental pickup in inquiries" for plate under 3 inches.

The normalizing line at its mill in Hertford County, N.C., which was upgraded earlier this summer, has been running at full capacity.

While the company faced a slight setback last month due to a dome collapse at its direct-reduced iron (DRI) facility in Louisiana, which has delayed its start-up to the end of the year (, Sept. 26), Ferriola said the incident was not an issue of the technology used, and the company would continue hot commissioning of the plant.

While the DRI facility will help Nucor control its raw material inputs, and ultimately costs, Ferriola said the company has received interest from other buyers.

"There has been an awful lot of interest in the market to buy DRI from us on a merchant basis," he said, adding that building a second DRI facility was still an option. "Start-up of the Louisiana plant will be a huge step forward to the implementation of our raw materials strategy."

The company also expressed interest in taking a larger role in the automotive sector. Facing the challenge of meeting fuel economy standards, the company has been conducting ongoing automotive exposed steel trials for high-strength and ultra-high-strength steels.

While the company saw third-quarter earnings jump 33.8 percent from the same period last year (, Oct. 17), Ferriola cautioned that the outlook for the steel market remains difficult, particularly due to low utilization rates at U.S. mills, high imports and global overhang.

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