Payment terms in the US ferroalloy trade are coming under closer scrutiny, with some suppliers and traders expecting a deterioration in the payment performance of steel mills during 2009.
One steel mill said that it had ended a relationship with a major manganese alloys producer after the supplier attempted to change an existing contract to cash terms from net 45 days. Meanwhile, some major suppliers have said they expect to see moves to tighten credit terms in advance of any deterioration in payment performance.
One trader said "People are definitely looking closer and closer to credit and are working with their credit insurers and the insurers are looking more closely at credit and companies' performance and likely performance."
The recent Chapter 11 bankruptcy filing of Aleris has rung alarm bells among suppliers in the trade who are worried that some of the weaker steel mills will resort to paying for goods late or could also end up in Chapter 11. According to traders and consumers, net 30 days remains the standard payment term for bulk ferroalloys delivered to steel mills, although traders said that inter-merchant business had moved to cash terms.
One steelmaker reportedly tried to push payment terms out to 70 to 90 days on a recent inquiry for alloys.
Source: Steel Guru
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