Stainless Steel: An Alternative Pricing System

MetalMiner welcomes guest contributor Badri Narayanan, a lead analyst at Beroe Inc., specializes in tracking various steel markets and related alloys. Beroe is the premier global provider of customized procurement services specializing in sourcing, supply chain visibility, financial risk analysis and environmental impact to Fortune 500 organizations. With nearly 400 dedicated procurement specialists in 38 domains, across 9 industries, Beroe proactively invests in knowledge assets to build valuable, real-time procurement insight. In this third part of of his series on stainless steel prices, he explains Outokumpu’s alternative pricing model.

Alternative Pricing System for Buyers:

This volatility has prompted the consumers to seek a more stable pricing system from the mills.

a) A pricing system without surcharge

The US, Europe and China account for 76% of the global stainless steel supply market, whereas the US and Europe alone account for about 30% of the global market. While the US and European markets follow a surcharge-based system, the Chinese market (by far the largest) is dictated by the pricing policy of the Chinese state-run mills, which publish prices on a periodic basis. This policy is devoid of any surcharge component and hence there is little transparency on the pricing policy of the government-controlled mills. The Chinese mills have the advantage of low cost of production. Chinese mills predominantly use Nickel Pig–Iron, a low cost, but with a polluting production process, instead of other expensive forms of nickel. This provides the Chinese with the luxury to not follow the volatile surcharge system.

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