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