In the ongoing negotiations for long-term coil supply contracts for 2025, EU automotive suppliers remain in wait-and-see mode until steelmakers have come to terms with the big carmakers. They prefer to have steel volumes negotiated by the carmakers directly.
In principle, the suppliers need to get a clear idea of the pricing struck one level up between the bigger parties. They need to make sure their own steel intake prices are in step with those of the OEMs, so that they can operate profitably. This was not always the case in the past, a buyer at a tier-1 supplier cautions.
“The last two years we had higher [steel] prices than the OEMs, and ended up with losses in our own negotiations with the OEMs,” the buyer tells Kallanish.
In comparison with one year ago, OEMs are currently heard asking for a price reduction exceeding €100/tonne ($105). This is already a big revision on the €200/t reduction demanded in October.
Against that, mills are offering tier suppliers a y-o-y reduction of merely €20-40/t, which the suppliers find unacceptable, the buyer says. “We tell the mills: strike a deal with the OEMs first, and we want the same price,” he states. “We cannot accept a difference of even €1.”
He says he is willing to reduce his tonnage ordered from EU mills directly and shift to pooled deals bargained by the OEMs. Many tiers prefer to have some of their steel volumes negotiated by their bigger customers, the OEMs, in pooling-by-retail. “That means you hand over some of your control,” but it is likely to lead to better steel prices, the buyer notes.
According to him, pooling often means a disadvantage for mills, which prefer to have direct deals with suppliers. Many suppliers have retained a wait-and-see attitude, but once the first deals are struck, the next ones will follow quickly. “We are talking daily, but the gap between figures is still wide,” the buyer concludes.
Christian Koehl Germany
