Report: U.S. Steel to Move Away from Spot Market-Based Sheet Steel Contracts in 2020

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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.

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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.

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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.

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