Steel Dynamics Inc’s (SDI) top executive is questioning the usefulness of his competitors’ recently adopted idea of publicly announcing spot prices on a regular basis and says hot rolled coil is a particularly inappropriate item for such a practice.

SDI chairman and chief executive officer Mark Millett, speaking at the Global Steel Dynamics Forum in New York attended by Kallanish, says coil is by its nature not a commoditised item that lends itself to identifying a unified market value.

In April, Nucor introduced a weekly "Consumer Spot Price" notification, explaining that it is meant to create transparency in the spot market for HRC (see Kallanish 8 April). A few weeks later, Cleveland-Cliffs announced that it would publicly issue a monthly HRC spot price (see Kallanish 29 April).

The new policy drew mixed reviews from customers, and now competitor SDI is joining the criticism.

“I guess I talk on behalf of the market participants that we talk to. I guess there's a general ... I don't know if it's just confusion more than anything else,” Millett says. “The stated reason was to lower volatility, have greater transparency, and those sorts of things. … It's early days, but it's done quite the reverse.”

He repeats speculation that domestic steelmakers are experimenting with strategies to reduce the influence of outside price reporting agencies (PRAs) in the monthly resetting of contract pricing.

“I think the unintended consequence maybe is that there's now an expectation that this could be the index,” Millett explains. “There's always been a history. There's always been a frustration even on our part. Price discovery, where is the price?”

Millett argues that coil grades, plus the volumes and frequency of transactions, are too customised to make a single spot price relevant. He suggest that perhaps beams are more appropriate for a generalised price announcement.

“Now for structural products, again I would say that's an absolute commodity. One 24-inch beam from company A, B, C, from us, whatever, [is] pretty much standard. Maybe you can just have an option for that type of product. But sheet is not a commodity, per se. It truly is a product. Every single transaction is a value proposition between the seller and the consumer, the customer. So it avails different prices. Hot-rolled coil is not sold at a price every one month or every week. It's a spectrum of prices.”

The nature of a width and grade order from a tube mill is too different from an smaller-volume order of higher-quality material to peg a single base price to HRC, Millett contends. Plus, coil from some mills has earned a better reputation than others.

“The [PRAs] of the world are trying to filter out the noise, so to speak, at least get a trend of where the market's gone,” Millett observes. “So again, from what I understand, that's the selling price. That's not necessarily the market price for steel.”