Steel Mills

One Mill's Attempt to Move the Flat Rolled Steel Market

Written by John Packard

There were just too many “Breaking News” articles flying around the steel industry on Tuesday. By the end of the day the market was in a tizzy and my phone wouldn’t stop ringing (the phone part is good news – I like to both talk and listen). One breaking news article caught our attention because it contained an attempt to influence the market through the use of a non-memo. I will explain…

Everybody wants to be the first to announce the new buyer of ThyssenKrupp Steel Americas. Something tells me it will be ThyssenKrupp AG that makes the announcement – and that won’t be done until they have finalized the deal. We can speculate and discuss rumors until we are blue in the face but, until ThyssenKrupp AG says the deal is signed then we should hold back on pushing panic buttons.

The fat lady has been warming up in the wings for the past six months on this one…We will have to wait a little longer to see what tune she sings and for whom.

Now to the meat of the breaking news article (which we discussed in detail in Tuesday evenings SMU Executive newsletter) released by SBB/Platts on Tuesday. The article contained a “drafted – not yet distributed – internal memo for its sales team, dated October 29, in which it says all contract negotiations and price offers will be temporarily suspended.”

I am flabbergasted that a steel mill executive would forward a memorandum which was under consideration – nothing more than a draft of an idea which evidently was not ready for prime time (not suitable for their own sales staff and their own customers) but was good enough to go to an industry periodical.

Not just any periodical – but Platts – the organization being considered by a number of mills as an acceptable alternative to CRU when it comes to 2014 contract base pricing and market adjustments.

In our opinion, the purpose behind this “non-memorandum” was a not so subtle effort to influence negotiations on 2014 contracts and an attempt to create a situation which could possibly influence both spot and contract prices.

We have been sitting here for most of the day thinking what would SMU have done had the memo been given to us rather than one of our competitors?

Ethics has been a core concern of mine throughout my years in the business. Is it ethical for a mill to float a hypothetical adjustment to their negotiating strategy to the media in order to see if they can move the market in a way which benefits their company?

Wouldn’t the mill have been better served by allowing an interview with the executive who could then present the mill’s views and reasoning in a fair exchange with the media?

For that matter – wouldn’t the mill have been better served to discuss the issue with their sales team and their customers and then watch and wait for the market to play out and have prices settle where business is fair and reasonable for both parties?

I don’t know which mill executive is responsible. We are hearing, through our contacts within the flat rolled steel industry, was this “non-memo” somehow related to the new management at a couple of mills? Or, is this the old guard coming up with a new bag of tricks?

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