
Automotive suppliers consider OEM steel purchase pooling
German carmakers and automotive suppliers might have to reconsider their method of negotiating with steel mills over annual coil supply contracts.
Automotive tier suppliers often feel the most hard done by in the talks, in which mills on one side and OEMs on the other are the bigger and stronger opponents. In this triangle, tiers are traditionally the ones that end up paying higher prices to the mills for steel, but receiving lower prices from the OEMs for the steel component in the parts they supply (see separate story).
In comparison with last year’s relatively high prices, “the mills this time conceded €50-80/tonne [$52-83] lower prices,” says a manager at an automotive supplier. This figure was also heard from other sides. But in the negotiations for finished car parts, OEMs are heard entering the talks requesting a year-on-year reduction of €100/t or more for the steel component.
Tier supplier say they could withdraw from purchasing steel individually. Instead, all steel negotiations would be put in the hands of the OEMs in a practice called pooling-by-retail, with one valid price for all coil distributed among all players in the chain.
According to the manager, pooling in France accounts for 90% of all negotiations, but for far less than 50% in Germany. So far, German negotiators trusted their own expertise most, but the squeeze in recent years has made them increasingly willing to hand over that responsibility. After all, pooling itself is a cost factor for the OEMs, with the need for additional personnel in times when VW and Ford have announced staff cutbacks. “And mills do not like pooling much, because of the same reason,” he tells Kallanish.
“We want fairness from the OEMs, not better deals,” the tier manager emphasises. “We are the sausage in the sandwich,” he adds.
Christian Koehl Germany

EU HRC prices sideways, price outlooks remain split
European hot rolled coil prices were flat Jan. 31, with market participants remaining mixed about the longevity of increased price levels as demand sentiment remained largely mixed.
Market sources reported tradable ranges of Eur580-600/mt ex-works Ruhr, citing the generally sideways conditions for price levels in North Europe, but reiterated how a large section of the market was growing more bullish against the backdrop of higher mill offers.
“The market is going up, driven by restocking and even mills that sell to automotive are seeing an increase in volumes,” said one German buyer. “But it is still not clear what the real consumption is, and some construction applications may only begin to pick up in Q2 or after the summer.”
Other sources argued against the bullish trends in the market, citing a continuation of high stock levels and uncertainty in the end-consumer market. “Service centers and cold rollers are sitting on huge stocks, so I’m not sure mills can get prices above Eur650/mt,” a second buyer said.
“We don’t see improvements to price levels at the moment, inventory levels are still high and there are still large volumes flowing into Antwerp,” a service-center source said. “Looking at real demand, I just don’t see an increase or prices going up, just sentiment.”
The same source reported a normalized HRC import price level of Eur575/mt CIF Antwerp, saying that compared to current EU-mill offers, prices remained competitive. Nonetheless, a large number of market participants have continued to stress a preference for domestic material, due to the recent trend of higher import offers, in part worsened by a volatile foreign exchange rate between the euro and the US dollar.
Conversations around European mill order books remained largely positive, as sources reported that several were at volume capacity until after March, and were not in a hurry to sell, despite the continued reports of higher stock levels further down the value chain.
A source from an EU mill argued that domestic production remained preferable to the import market. “Antidumping investigations are helping keep buyers on domestic,” the source said. “Imports offers are not competitive, and you can get better quality material, and clearer lead times if you buy domestically.”
“The problem at the moment is uncertainty across the market, so while prices are inching up and order intake is healthy, there is still too much uncertainty from politics.”
A second mill source said demand was stagnating, but “coil producers are absolutely in control, as Q1 is pretty much covered, so no producer is under pressure to sell cheap.”
Platts assessed the North European domestic HRC price at Eur590/mt ex-works Ruhr, and the Southern European domestic HRC price at Eur585/mt ex-works Italy, both stable on the day.
Platts assessed imported HRC prices in Northwest Europe and Southern Europe, at Eur545/mt CIF Antwerp and Eur545/mt CIF Italy, respectively, with both also remaining flat on the day.

Automotive tier suppliers fret over steel cost squeeze
Automotive steel suppliers in northwestern Europe have reason for concern as they might again end up as losers in annual coil supply negotiations.
Most annual negotiations between steel mills and big buyers, often carmaker OEMs, have been completed.
Outstanding deals to be struck with tier suppliers further down the chain should ideally repeat the results of the deals with OEMs. “Steel should be a neutral cost factor between us [steel buyers] and the OEMs [their customers]; a 1:1 ratio would be the best case,” a manager at a tier supplier says. But this has not been the case in the last two years “and it is threatening our business”, he tells Kallanish.
A manager at one mill has already suggested that upcoming agreements on the tier level could result in somewhat higher prices than those struck earlier with the OEMs, as spot market prices climbed slightly in January. Mills might not be getting the €600/tonne plus ($622) they wanted for hot rolled coil, but a slow rise has been observed in deal prices, by €10-20, to above €570/t.
The annual contract deals so far appear to have resulted in a year-on-year reduction of €50-80/t from last year’s high level; some say the reduction has even been steeper, inching towards €100 year-on-year.
A lower y-on-y reduction – effectively meaning higher paid prices – would be bad news for the tier suppliers, who are already sufficiently concerned about their negotiations with the OEMs.
They are nevertheless receiving support from players not directly involved with OEMs. “It is unacceptable if mills concede less – y-o-y reduction – to the tiers than they did to the carmakers,” a buyer from a German service centre says. “If mills want fair deals, they should have bargained better prices with the OEMs, rather than trying to cash in on the tiers now.”
Christian Koehl Germany

Grupo Soledad enters steel industry with Aceros y Servicios acquisition
Spanish company Grupo Soledad (GS) has entered the steel sector with the acquisition of Aceros y Servicios (AyS), a Valencia-based special steel supplier and manufacturer of components for the railways, tooling, ceramics, and machinery sectors, Kallanish notes.
GS specialises in the retail distribution of tyres and spare parts for the automotive industry. Additionally, through its subsidiaries, the company manufactures components for the construction sector via Caucho Industrial Verdú (Alcoi). It also produces machinery for the recycling sector through Tallants Navarro.
“With this acquisition, the group is expanding its expertise in the special steels sector while also strengthening the production capacities of two of our companies, both of which have ambitious expansion plans in their respective markets,” Grupo Soledad states.
AyS is set to develop steel components for Alcoi, focusing on the railway infrastructure and construction sectors. These are both experiencing strong international demand due to the expansion of high-speed rail and the modernisation of conventional rail networks across Europe. Additionally, the company will manufacture machinery for ferrous recycling and industrial steel cutting blades for Tallants Navarro.
“Aceros y Servicios, alongside the new opportunities presented, will continue to create value for its customers. This will be achieved through optimisation processes in steel selection and application studies, areas in which the company has seen significant success in recent years,” Grupo Soledad adds.
Todor Kirkov Bulgaria