Auto contracts talks underway; most still unfinished

Automotive steel supply contract negotiations are well underway in northern Europe, with mills asking for price increases, although many negotiators have yet to reach a compromise, market sources told S&P Global Platts Tuesday.

For HRC, most sources said that northern European mills were asking for around Eur20/mt more, with some at Eur10/mt more for cold-rolled coil and hot-dip galvanized sheet versus last year’s annual or semi-annual contracts, which were based on current spot price levels or slightly lower.

Current spot levels for the Platts TSI daily index were calculated at Eur548.50/mt ex-works Ruhr Tuesday for HRC, Eur620/mt ex-works Ruhr Tuesday for CRC and at Eur644/mt ex-works Ruhr Friday for the weekly HDG (base substrate) index.

“We offered +20-30/mt to OEMs on contracts, but they weren’t excited. I think negotiations are gonna be tough,” said a source at one tier-1 mill.

However, sources remain skeptical about whether mills can achieve increases or would have to settle for rollovers.

“Problem is that distribution/auto suppliers see falling prices because they look at the spot market and think they can get that in long-term contracts,” said the mill source.

A mill-side source said that raw material prices on top of high alloy costs would warrant asking for contract price increases.

Another source close to a European mill said he expects negotiations to take a long time, but that those who need first quarter material are buying.

Some contracts in the UK have, however, been agreed with volumes for first half 2019 supply settled at +£10-15/mt above 2018 contracts base price, a tier-1 mill source confirmed to S&P Global Platts. The contract agreements come amid increasing concern for the UK car industry as the Jaguar Land Rover Castle Bromwich assembly plant works a three-day week until January.

Meanwhile, European buyers are waiting for price direction from mills, while keeping a close eye on the import market. “Car negotiations are paralyzing everything, mills don’t want to emerge from their hole,” said a German service center source.

“Messages from [the trade fair] Euroblech were missing, lots of people came that wanted direction but that didn’t come,” the source added.

Laura Varriale and Len Griffin