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Steelmakers struggling to make payments to suppliers

Platts reported that more and more cash strapped steelmakers are struggling to pay for services and equipment, with some resorting to last minute cancellations or renegotiations. Suppliers to the steel industry are voicing concerns over growing instances of disregard by steelmakers for contracts signed for services and equipment.

Mr Herwig Haunschmid MD at Vatron, a measurement and control devices subsidiary of Voestalpine and Siemens VAI, said that "It''s really amazing how quickly the culture has reverted back to this medieval state. We''ve had delays, cancellations and re negotiations after signing. Russian and Ukrainian customers in particular are struggling to pay. The business culture is tougher there, they just choose not to pay."

He added that "Handshake capability, or the likely ability to fulfill a contract, and contract water tightness are now key considerations for us. Also, we asked ourselves whether we should join this kind of behavior, but in the end we decided not to. We will simply treat people in the same way they treat us."

When asked if any improvement in relationships was likely soon, he said that "No, I don''t think so. Most steelmakers have difficulties with working capital and liquidity, so I''m sure if the economic situation worsens, trust in contracts will worsen too. The amount of invoices with delayed payments is definitely increasing."

He added that "In some cases, we are told our customer''s management has frozen all payments by default. In these cases, we have had to argue our case and use some leverage to receive payment."

Apr 12, 2009 10:44
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