INDEX STEEL PRICING IN THE US WILL CONTINUE IN ANOTHER FORM - MEPS
The practice of steel purchasing from major steel mills in
the US, using discounts from CRU’s published steel price index has been
abandoned. This, however, is not likely to halt the use of consultants’ pricing
information in the future. The methodology for making the agreements in the past
was fatally flawed.
When MEPS and others started to research and publish steel prices in the 1980’s
it was to provide independent information about deals concluded in the American
and European markets. It was designed to assist buyers and sellers to reach
agreements. The values were not developed to be used as a reference to be
discounted for sales to major industrial sectors. It was recognised, at the
time, that the automotive industry enjoyed confidential discounts.
In later years, after validating the information, a number of buyers and sellers
formalised the use of MEPS data in contracts. It has become popular to utilise
the published indexes, or the month-on-month/quarter-on-quarter, percentage
changes, as a reference to set new contract prices. This is the case today and
the use of this methodology is increasing in Europe.
There is still a need in the US and other parts of the world to avoid lengthy
and expensive regular negotiations on steel prices. An index-based system is a
common solution. Using researched data from an experienced consultancy company
is an accepted practice.
Linking changes in published prices over a given period of time is beneficial
for both buyer and seller. It has proved to be valuable in Europe and is now
likely to become more extensively used in the United States.
Source: MEPS - International
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