Steel Corp. is revising its payment terms on purchases in 2014,
several scrap suppliers told AMM.
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
didnt respond to a request for comment.
"This is part of the
companys 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 steelmakers stepped up efforts to reduce costs (
amm.com, 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 (
amm.com, Aug. 22).
measures include the decision to shutter the companys
Hamilton, Ontario, facility effective Dec. 31, 2013, as well as
two coke batteries in Gary, Ind. (
amm.com, Oct. 29).
Scrap suppliers, who
will have to wait an additional two weeks to be paid for their
material, greeted U.S. Steels decision to extend payment
terms with some reluctance.
A southern source said
that he is accepting the terms but isnt 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 werent attractive enough.
"Thats 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
A 1-percent early pay
discount is more of the standard, the shredder source
dont want to wait an additional two weeks to receive
payment. "This could just backfire on them because people
dont want to get into that situation," one supplier
A Midwest scrap
supplier added that he is actively planning to sell his monthly
program to other mills.