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USS extends scrap payment terms in 2014

Keywords: Tags  scrap suppliers, U.S. Steel, Carnegie Project, Mario Longhi, payment terms, Lisa Gordon

PITTSBURGH — U.S. Steel Corp. is revising its payment terms on purchases in 2014, several scrap suppliers told AMM.

The Pittsburgh-based steel producer advised its customers that effective Jan. 1, 2014, payments will expand to net 45 days from net 30 days. The steelmaker is also offering a 20-day "quick pay" option that suppliers can take if they agree to give the company a 2-percent discount.

The company didn’t respond to a request for comment.

"This is part of the company’s strategy to save more money," a source familiar with the decision said.

U.S. Steel president and chief executive officer Mario Longhi has been overseeing the steelmaker’s stepped up efforts to reduce costs (, May 1). The initiative, called Project Carnegie in honor of company founder Andrew Carnegie, is a long-term effort to become more efficient and eliminate waste throughout the company, Longhi said in August (, Aug. 22).

Other cost-cutting measures include the decision to shutter the company’s Hamilton, Ontario, facility effective Dec. 31, 2013, as well as two coke batteries in Gary, Ind. (, Oct. 29).

Scrap suppliers, who will have to wait an additional two weeks to be paid for their material, greeted U.S. Steel’s decision to extend payment terms with some reluctance.

A southern source said that he is accepting the terms but isn’t happy with the change. "It is a ploy to lower their costs and operate longer on my money," he said.

None of the scrap suppliers contacted by AMM said they would take the early pay option, as the terms weren’t attractive enough. "That’s crazy. Two percent on 45 days is more than 18 percent annually. This would cost me $40,000 every time I sold to them," one scrap supplier with shredding capabilities said.

A 1-percent early pay discount is more of the standard, the shredder source added.

Other sources don’t want to wait an additional two weeks to receive payment. "This could just backfire on them because people don’t want to get into that situation," one supplier said.

A Midwest scrap supplier added that he is actively planning to sell his monthly program to other mills.

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