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European buyers of raw materials target long-term contracts in cost-cutting drive

European buyers are seeking to reduce their costs and lock in lower prices by diversifying their raw material feeds and committing more of their requirements to long-term contracts, according to Chris Brzozowski, commercial manager at ICD Europe.

"We are seeing an increase in buyers looking to secure long-term orders as opposed to relying on spot purchases," Brzozowski told Metal Bulletin.

Prices for raw materials, including molybdenum and tungsten, used by the aerospace, automotive, oil and gas and associated industries are still considered to be low on the cost curve, while the push for purchasing departments to cut costs has not relented.

In Europe, ICD has had enquiries for long-term, fixed-price contracts concerning delivery for material into the latter part of 2019, as customers seek to stabilise their costs and to reduce their exposure to price fluctuations.

"There is a financing cost associated with this, but buyers are happy to accept that cost if it secures stable pricing on a long-term basis," Brzozowski said.

North Carolina, USA-based ICD Alloys & Metals extended its European presence in April this year, opening its doors at ICD Europe with a processing and handling facility in Rotherham, near Sheffield in the UK. ICD Europe’s primary focus is on molybdenum, tungsten, hafnium, tantalum and niobium products, although it is continually looking to expand its product portfolio.

Proximity to European customers is essential in enabling ICD to capture customers’ evolving demands. From a corporate level there is a drive to create a more fluid business, which makes it inefficient for buyers to sit on high stock levels and tie up capital.

"Consumers demand a proactive supplier and the ability to react to just-in-time deliveries. Consumers do not want to hold large quantities of expensive stock, so they are increasingly reliant on suppliers delivering at short notice," Brzozowski said.

Buyers are increasingly in favour of "just-in-time" deliveries, which allow for stock management, providing specific quantities of material on specific days.

European customers are also turning to secondary metal revert in order to reduce their costs.

"Buyers continue to look for the most cost-effective way to source their raw materials and are becoming increasingly open to new products…and variations of old ones," Brzozowski said.

This includes revert – materials which have been recovered and recycled – and binary alloys, which offer a cost saving to the consumer compared with virgin materials.

In this capacity, buyers are turning to established companies with knowledge and expertise in secondary materials, which, without the necessary technical expertise, can be more susceptible to material contamination. A highly experienced supplier is key if buyers are to
reap the benefit of alternative raw material sources, as supply to the aerospace industry requires technical expertise, knowledge and quality control, Brzozowski said.

ICD’s 65-year legacy and new UK base make it well placed to supply high-quality raw materials in line with buyers’ drives to cut costs, he added.

"Buyers must have complete faith in the quality of the supplier’s product, otherwise they risk issues with contamination and any cost saving gained from the revert is eliminated," he said.

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