As metals buyers look to lock in their metals spend strategy, a reported decision by U.S. Steel could throw a wrench into some of those plans.
According to a report by S&P Global Platts, the Pittsburgh-based steelmaker plans to move away from spot market-based adjustable price contracts for its sheet steel customers in 2020.
According to an internal letter cited by Platts, the steelmaker said “volatile and unpredictable” conditions in the flat-rolled market have contributed to increased use of adjustable price mechanisms.
A spokesperson for U.S. Steel declined to comment for this story, stating the company does not discuss customer relationships publicly.
In the second quarter of 2019, 23% of U.S. Steel’s steel in its flat-rolled segment was sold on spot-based contracts, according to the steelmaker’s quarterly reporting.
Meanwhile, 77% of the steelmaker’s sales came via contract-based arrangements, including: firm prices (33%); cost-based (5%); market-based, quarterly (20%); market-based, monthly (18%); and market-based, semi-annual (1%).
For the full-year 2018, the flat-rolled segment’s sales mix came in at 21% spot to 79% contract (33% fixed; 23% market-based, quarterly; 16% market-based, monthly; 6% cost-based; and 1% market-based, semi-annual).
The steelmaker recorded shipments in its flat-rolled segment of 3.08 million net tons in Q2 2019, up from 2.73 million net tons in Q1 2019.
However, in Q2 the average selling price per net ton from the steelmaker’s flat-rolled segment came in at $779 per net ton, down from $798 per net ton in Q1 and $819 per net ton in Q2 2018.
U.S. steel prices have steadily declined since mid-2018, a few months after the Trump administration used Section 232 of the Trade Expansion Act of 1962 to impose a 25% tariff on imported steel.