Buyers criticise annual EU coil contract prices

Many northwest European coil market players are finding that long-term coil supply contracts agreed in recent days have resulted in favourable terms for mills and do not reflect the current business environment.

Mills had initially targeted a plus of €600/tonne ($686) over prices signed in October 2020 for 2021 contracts, when the subsequent price surge could not be foreseen. ArcelorMittal even went somewhat higher with its first price targets of €1,080 for hot rolled coil and €1,200+ for hot-dip galvanized coil.

The agreements ultimately settled at a plus of around €500 for galv and cold rolled coil, and possibly somewhat less for HRC. Most HRC deals averaged at around €1,000/t, with peaks of €1,050 and lows of €950, depending on individual parameters.  

Mills were heard entering negotiations with the understandable attitude of seeking compensation for the previous low-priced deals of late 2020 – at €500-550/t for HRC. This meant they wanted to “decouple them from the actual spot price which has softened considerably since autumn”, consultant Andreas Schneider wrote in December.

The HRC spot market price has in the meantime kept slipping well towards €900, so mills cannot complain about the outcome of the contract deals. But some buyers do. “This is a Christmas present for them,” a manager of an automotive supplier complains to Kallanish. “The facts don’t justify that. The increase of raw materials would allow for a year-on-year plus of €300 at best.”

A manager at a German cold-roller company buying in half-year instalments concurs that “we are not happy with the result”. He says buyers had expected prices to come out lower than in May/June, when they were close to an all-time high.

He argues that market supply is much better now than last year, demand has normalised, and so has order intake at mills. Still, mills eventually had the better cards, probably because time has progressed too far already for buyers to risk playing much longer. However, at the time of the next half-year negotiation in May, “this might backfire on them”, the cold-roller manager says.

Christian Koehl Germany