US Steel seeks to change its steel contract terms

Integrated steelmaker US Steel is seeking to change the terms of its steel contracts with its customers.

The Pittsburgh-based company said in a letter to customers today that for its 2020 contracts it will not enter into spot market based adjustable price contracts. The company's new method would involve transaction by transaction discussions, including monthly negotiations.

In its second quarter earnings release US Steel said spot sales accounted for 23pc of its sales, 39pc were market-based, 33pc were listed as firm contracts and the remaining 5pc were cost based.

One service center called the decision "a bomb in the market" and was uncertain how it would impact business or if the rest of the market would follow.

The change, if implemented, would force service centers to renegotiate their CRU-pegged contracts with all of their customers, the source said.

US Steel did not immediately respond to a request for comment.

In its letter to its customers US Steel cited volatility in the North American flat-rolled markets for the change.

The Argus weekly domestic US HRC index settled at $595.50/st today, up 14pc compared to the yearly low of $521.75/st at the end of June. Steel prices started the year at $740/st, down from peaks above $900/st in mid-2018 on fears of oversupply and a weakening US economy.