Contract Pricing Negotiations Continue

Another service center, located in the western portion of the Midwest, related some of their frustrations with the ongoing negotiations with their mill suppliers. “The best thing for any mill is consistent tonnage. They don’t want me out there fishing every month or every quarter.” This executive told SMU that these CRU based programs allow service centers to lower inventories. They told SMU that there mill supplier was not offering any “deals” only indexed based base pricing with a small quarterly rebate of $10 per ton. The same mill has had the business previously at CRU minus 4 percent.  When pushed the mill representative told the distributor that the mill wanted a price increase.

A large national service center purchasing executive told SMU, “It’s early. Nobody’s in a panic. It’s a sparing game right now.” He told us that U.S. Steel and ArcelorMittal have “dug in their heels” and are asking for full CRU pricing. The initial rebate offers from AM were $5 per ton. “It’s going to take someone taking business [away from a mill] and have them lose a position. The mini-mills will be the wild card.”

A manufacturing company reported to SMU that negotiations have started – at least they have made their request for pricing from their mill suppliers and, “…the mills are very sluggish with responses.”

Another end user who buys prepainted steels confirmed that their CRU based deal was going to be rolled over for 2014. The size of the discount was not divulged.

We spoke with two other large manufacturing companies with multiple operations during the week and received very similar responses to our query regarding contract negotiations. In both cases they reported the mill offers as being a bit “confusing” and causing some consternation within their organizations. At the same time they believe the initial offers are “posturing” on the mills part and their first offers will  not be where negotiations conclude. Both of these manufacturers also warned that they were considering taking some (or more) of their business to offshore sources (imports).

As was mentioned by one service center – we are early in the process and we will watch to see if the mills are successful in changing the way contracts are negotiated and adjusted during 2014.