Service Centers

Letter to the Editor: Actually, Letter to the Domestic Steel Mills

Written by John Packard

Steel Market Update received the following letter to the editor from a flat rolled steel service center. With contract negotiations heating up we thought the letter may spark a dialogue between the steel mills and their customers:

John, we are a Mid-West Steel Service Center and attended your Steel Market Update Atlanta conference. We gained much needed knowledge by listening to your guest speakers and the sharing of knowledge with the other attendees.

I wasn’t surprised by the looming question of Trade Case filings that were being asked after many of the speakers presentations. Last fall I predicted the pending rise in imports and knew that we would be in the current predicament with respect to the surge of imported steel.

I would like to share my thoughts with you as I interpret the current situation. We have been a 100 % buyer of domestic material for many years and have enjoyed a long history of Contract Purchases with several domestic mills, like many of the attendees.  Last fall we notified our steel mill suppliers that we wanted to continue our domestic Contracts as they were. They all were CRU based and had a modest CRU minus component which we pass on to our customers that sign up as a much needed incentive to conduct regular monthly business with us. Some of our Mill Suppliers had a much different message last fall, with greatly reduced incentives and much higher monthly minimum volumes, essentially telling us that our business was no longer attractive to them.

Our company went into “ protection mode” in an attempt to preserve the economic balance between us and our customers. The only direction we had at the time was to seek out import opportunities. We were able to offer value and firm pricing for a longer duration. We were able to secure business that keeps us and our many employees in the office and the plant employed. As of this year, approximately 30% of our total purchases are coming from other countries outside the United States. It is the best margin business that we enjoy and has preserved the commerce that keeps us in business. We would never have proceeded in this fashion if not for the clear message from some of our Mill Suppliers that we received last fall.  

Everyone is talking about the dumping of Imported Cold Roll & Galvanized as if these countries of origin are just producing steel and shipping it overseas. We are all willfully purchasing this material because we have no other viable options.

There was a recent major change in buying philosophy that occurred out of self-preservation. I believe there are a few short sided Domestic Steel Mills that need to wake up and offer a better incentive package to promote long term business with their many Service Center customers, understanding that we all have supply options and may continue to do so  if we do not get a supply package that our many customers can accept.

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