Service Centers

Letter to the Editor: Tsunami Article & Contract Customer Issues

Written by John Packard

Steel Market Update received a number of comments regarding our “Tsunami” article published in Sunday evening’s issue. A large service center shot us an email about something they were seeing in their market. We did some checking with other service centers and did not see this as a pressing issue but we might be in the early stages of a trend. Send me your comments on the subject.

Here is what we got from a large Midwest based service center:

“…the piece yesterday was quite timely and on topic for the current affairs of service centers.  You’re getting at the heart of the distribution challenges.

There might also be another perspective to consider in the market.  Consumers may not always evaluate the “counterparty” risk in the agreements they make.  We are beginning to see consumers look for items that we had thought they already had wrapped up with an agreement.  Meaning, the supplier they chose is not able (willing?) to fulfill the volume of the agreement, and they are shopping now.  This could be due to availability, or price influenced availability.  Here, consumers believed  (maybe a “suspension of disbelief”) that they were covered at fabulous numbers – frequently much more buyer favorable than the forward curve at the time of agreement –  but now find difficulties securing their need from the intended source.

We are more than 4 months into a rising price environment, with the last 60 days being accelerated.  And it is possible that we are only now establishing a realistic bottom end for pricing (say around the $500 mark compared to consumer hopes of $350).   Suppliers disappointing their clients is a factor that seems to be growing.”

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