IN DEPTH: Use of daily alloy surcharge widens but distributors still wary

The daily alloy surcharge model offered by European stainless steel mills is growing in popularity but stainless steel distributors in Europe remain wary of switching from the widely used monthly surcharge model, market participants have told Metal Bulletin.

"The number of customers choosing one of the three daily alloy surcharge options has grown constantly [over the past few years] and the model is used by all our different customer groups," a spokeswoman for Finnish stainless steelmaker Outokumpu told Metal Bulletin on Thursday March 16, referring to both end-users and distributors. The increasing use of the daily surcharge has meant that both mills and their customers are paying greater attention to daily fluctuations in the prices of raw materials such as nickel and ferro-chrome. Outokumpu’s improved earnings have been ascribed in part to the greater use of the daily surcharge model, one market observer told Metal Bulletin. "The daily alloy surcharge system only helps the mills in an upward market but, if raw materials prices go down, the mill takes all the risk and the customer has none," a bank analyst told Metal Bulletin. "If ferro-chrome and nickel prices were to drop this...

Published

Viral Shah

March 20, 2017

13:55 GMT

London