Steel Mill Pricing - A Customer by Customer Proposition
Steel Market Update takes great effort to insure we have the most accurate data available when it comes to prime mill pricing for hot rolled, cold rolled, galvanized and Galvalume products especially when price adjustments are being made. We understand – and our readers need to understand – the relationship between a mill and a customer is one on one. By this we mean not every customer receives the exact same price from a supplier and prices may vary even within individual mill facilities owned by one company.
An excellent example is Nucor. Nucor generally operates – or allows their plants to operate – as separate profit centers with their own unique products, customers, lead times, competition and customer issues. In very tight markets we have seen corporate Nucor come out with specific company pricing. In most market conditions each plant operates separately from others and may/may not have differences in pricing from one mill to another and from one customer to another.
What is Important is the Range & the Trend not “the” Number
It is rare for any mill to have one set of identical prices for each individual client. This is the reason why Steel Market Update provides our high/low range and why we tend to downplay our average or the index number we use to compare our number with others.
Even with our high/low range SMU understands there are steel buyers out there who may be buying outside the range (higher or lower) due to their size, special rolling arrangements, quality considerations, contract pricing or for other reasons. Our goal is to be able to capture 80-90% of the companies within our range and to act as a guide post – not an end all – to negotiations with your suppliers.
What we feel is important is “the trend” and not “the number.” Each customer knows what they are paying for their steel and they can respond to pricing trends as they feel is appropriate for their company at any point in time.
SMU utilizes a number of avenues to collect price point data – from direct contacts with buyers as well as sellers of steel, to the revue of documents which have been made available to us and we try to take into consideration what other indexes are seeing in the market. If we find abnormalities or find changes we try to make sure we have multiple points of reference before going into print either in our newsletter or our Blog. For those mills who will respond to our requests for information we ask – not all mills respond to our requests (ex: USS will not respond to any request for information or clarifications about pricing – so we have stopped asking, Severstal NA on the other hand will at least provide guidance or a company position if there is one at any point in time). Some mills go out of their way and post their price announcements (guidance) online for all to see such as AK Steel. Even then our homework is to get customer clarification and confirmation of transactions being consummated at a specific price level. We find there is generally one last attempt at a price increase even as numbers begin to crash.
Don’t believe everything you read – Do your homework
Steel Market Update is but one tool a company can reference but ultimately the relationship is between the supplier and the customer and that relationship (and good negotiation skills on both sides) will dictate the final pricing a buyer will receive. We don’t do any negotiations and, at the end of the day, we are no longer buying or selling any steel.
Give them what they want…
We live in an information age where prices are shared very quickly. It seems it will only be a matter of time before the media – whether Steel Market Update or some other form of media – will be taking prices to the market as soon as they are announced and/or confirmed.
Our customers are asking for more information about subjects which may have been of little interest (or not understood before) by the mainstream steel media.
SMU received a couple of emails from a service center executive on Monday asking us to explain what impact the Chinese iron ore negotiations would have on domestic (U.S.) pricing (and how the domestic mills may have an advantage over foreign steel). The reason behind this question (and we receive many like it on a daily basis) is this comment: “Thank you for the feedback. I think our customers are trying to understand what’s going on, and why the prices are moving up. Thanks for the research.”
It is that same reason which drove us to create Steel Market Update in 2004 – a way to keep our customers informed and to explain why prices, lead times, surcharges, etc. are adjusted and how through information/education and staying connected to the marketplace companies could protect themselves and possibly even prosper in these tumultuous times.
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