Occasional offers of sections from overseas to the EU have a hard time prevailing against established relationships between mills and domestic buyers, according to an experienced market observer.
A “loyalty bonus” affirms the relationship between buyers and their domestic supplier mills. At the end of a calendar year, distributors are rewarded with a retroactive refund or credit of normally €5 ($5.50)/tonne of the volume ordered throughout the year, he explains to Kallanish.
However, if a buyer decides to call up less tonnage than envisaged at the beginning of the year, that bonus expires altogether. “So, if you decide to go for a good offer from elsewhere at the end of the year, and take less from your original supplier, you will lose the bonus for the full year,” he explains. For example, if one buyer calls up only 25,000 tonnes, rather than the 30,000t agreed earlier, he will lose a total bonus of €125,000.
This keeps many buyers away from considering imports, the observer notes, and he does so in view of current offers from China at €700/t ($780) delivered Germany. “This is a good 10% cheaper than from EU mills,” whose current prices are at €760-790/t, depending on category.
Still, German buyers will rarely go for those offers, even if they appear attractive at first sight. “But what they do, they will use them [import offers] in negotiation with their traditional mills in Saxony-Anhalt and Thuringia,” he notes.
Christian Koehl Germany
