Good steel buyers know everything is negotiable. They understand market momentum, the strengths and weaknesses as well as the needs of their suppliers, as being key ingredients to getting the best steel pricing for their company.
Good buyers know the power of the relationships built with their suppliers. They know contract negotiations are different than spot purchases. Today we will discuss spot buying flat rolled steel.
At the end of April and early May, the domestic flat rolled steel mills began raising prices on hot rolled, cold rolled, galvanized and Galvalume steels. The increases ranged from $40 to $60 per ton (more if you were buying at the low end of the range) with most mills wanting to get to $500 per ton hot rolled ($25.00/cwt base) and $700 per ton cold rolled and coated steel base pricing ($35.00/cwt).
It is important to note the prices referenced are for base prices prior to extras and freight, which can take transaction prices well above $500 HRC and $700 CR/GI/AZ.
This morning SMU spoke with a medium-sized service center who told us about the negotiations he was having with his domestic mill suppliers, “The last couple of weeks have not been black and white.” He went on to discuss that prices have indeed risen, but not to the levels suggested in the original mill announcements.
“The market is up a little bit, and they [steel mills] are trying to get it [prices] up.” He added, “If you actually have tons to place, and you say to the mill, ‘Look, I need this price, can you hit it?’ You just might get it.”
The key in this market is not to send mills “shopping lists” and expect to receive the best pricing.
Having tons to place is “more relevant now,” according to this service center buyer.
This buyer told SMU there are regional differences in pricing. This may not be obvious to a buyer that focuses on one supplier, or suppliers in their own geographical area. Individual mills (and individual plants within those mills) have their own pricing directives and goals. You need to be aware of regional differences and how a supplier outside of your geographical area may be hungry enough to make the spot items you seek work within your pricing parameters.
We discussed with our service center steel buyer two other areas of potential negotiation that buyers should be discussing with their suppliers: extras and freight. In both cases, he reported the mills are willing to deal and the impact on the true base price being paid can be dramatic.
Markets change, and steel buyers need to be aware of the changes in real time, and to anticipate what is going to happen next (and why?).
As always, stay tuned to Steel Market Update.
John PackardRead more from John Packard
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