October 07, 2008

EU steelmakers will embrace benchmark pricing -Vestas

A senior executive at wind turbine maker Vestas last month told Platts that in the context of increased steel price volatility, steel mills will have to move towards floating benchmark based pricing and disclose details of raw material purchases.

The executive explained that "There is absolutely no doubt that sooner or later, external pricing benchmarks will be used as a basis for steel contracts explaining that this would allow for a more accurate distribution of value between steel supplier and consumer. He predicted that the market will also become more transparent as steelmakers are forced to disclose details of their iron ore and coal purchases, in order to justify steel price increases.

He also dismissed the idea that Asian mills couldn't produce the highest quality steel as a myth propagated by European producers. He said that "If you are firm on the requirements for your order, Asian mills can produce exactly the same material adding that European standards were often used to define the steel orders.

Addressing recent concerns about a general lack of availability in the market of steel plate used in wind towers, he said that "We have enough steel, thanks to good long-term contracts negotiated two years ago. He also stressed the importance of conducting forward looking market intelligence in order to minimize the adverse impact of upstream price volatility.”