MEPs Unveil Upcoming Shifts in Stainless Steel Purchasing Patterns!

Industry Experts Explore Steel Pricing Models and Digital Sales Horizons at NEC Birmingham

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During a lively discussion at NEC Birmingham, expert panelists from diverse areas within the steel sector shared the stage with MEPS senior consultant Kaye Ayub, delving into the future of the 'base plus alloy surcharge' pricing model and the promising prospect of digital sales streamline.

The alloy surcharges, determined based on the market price changes of raw alloying elements such as chromium, titanium, molybdenum, and nickel, have garnered increasing attention following the unexpected nickel trading descent at LME in March 2022.

MEPS International facilitates a monthly peek into stainless steel prices and market tendencies through its Stainless Steel Review.

At the UK Metals Expo discussion themed ‘Stainless Steel: Navigating Trends and Price Dynamics’, Ayub engaged the panelists on whether transitioning to a more effective pricing system has become imperative.

Simon Marsden, Outokumpu UK’s head of sales, shared his insights: “The longstanding 'base plus AAF (alloy adjustment factor)' system continues to hold its ground, especially in contract-related dealings.”

Addressing 'base plus' pricing's place,

Marsden acknowledged the growth of effective pricing but emphasized the continued relevance of 'base plus AAF' for contract prices, and its demand among people.

He remarked on the impact on confidence when the alloy price dwindles while the effective price escalates, underlining the necessity to manage this aspect.

Lauro Castelo, associated with Trasteel International, highlighted the contentious nature of alloy surcharge discussions. He reminisced about May 2022 when the surcharge peaked, marking challenging dialogues, with the grade 304 alloy surcharge reaching £3214 per tonne.

Addressing negative prices, Castelo pointed out the recurring questions about the model’s sustainability for distributors, despite its viability for end users.

Langley Alloys director, Rodney Rice, mentioned their meticulous tracking of raw material prices and the LME to forecast potential market price shifts, catering mainly to the aerospace, gas, and oil sectors. He noted the relatively stable prices and emphasized the continued focus on availability and lead times.

In a quest for market transparency, Ayub inquired about the panelists' take on a publicly traded stainless steel scrap price to uphold the 'base plus AAF' pricing model long-term. Castelo responded positively, mentioning the predictability it would offer.

Digital Transformation in Steel Buying

The panel shared an exciting idea of Amazon-esque online platforms for steel trading as a forward-looking solution for readily available stainless steel products.

Marsden revealed Outokumpu’s active steps towards simplified online sales for specific materials, touting the advantages of online customer portals which facilitate speedy and convenient purchases, much like Amazon’s model.

However, some panelists expressed reservations, citing their business complexities which may not gel well with online sales.

Rice elaborated on the distinct requirements like packaging, testing, and inspection which render online retail unfit for Langley Steels’ offerings. Brown McFarlane's Paul Murphy shared this sentiment, noting the human factor's indispensable role due to the processing involved in 90% of their steel purchases.

Stainless Market Gaze Forward

Excluding Langley Alloys’ niche market, the panel foresaw a challenging road ahead for the broader stainless steel sector in the next three to six months.

Castelo posited that a dip in interest rates could herald a resurgence in sales volumes.

Marsden shared a tempered optimism, noting a slow pace in flat stainless steel product sales due to reduced demand from white goods and catering sectors. Yet, he anticipates a brighter 2024 with the launch of new projects and business picking up pace.

Murphy stressed the importance of stock management, reflecting on Brown McFarlane’s splendid performance in the past years but foreseeing a bumpy ride ahead given the stocks procured during a higher market price period.

This engaging dialogue among industry experts not only shed light on the pricing model dynamics but also opened a window into the potential digital transformation poised to redefine the steel market landscape.

Source : MEPS International