Steel-based automotive components suppliers say they are suffering in ongoing contract negotiations with carmakers, which are exerting their bargaining power to push prices down. This is having an indirect impact on automotive steel pricing talks.
This is a relatively customary scenario, but, in some cases this year, the squeeze for small and medium-sized suppliers is worse than in other years, Kallanish hears from a manager of one European automotive components supplier.
In this year’s negotiations, carmakers have been asking for a price reduction of €80 ($88) per component in comparison with prices one year ago. “This is a pretty bad attitude; we are standing with our backs against the wall already,” the manager says.
Although the contracts cover a full calendar year, negotiations can drag on far after the year has begun, sometimes even until September, meaning prices agreed will be applied retroactively to deliveries already executed. It can therefore happen that by mid-year, talks might be held up. One big German car brand, especially, is staying tough in the talks, the manager says.
These downstream side negotiations scratch against the upstream talks for steel supply from steelmakers, some of which are renewed around mid-year. Meanwhile, mills have mostly given up on their position, now accepting discounts over the last period. For the automotive suppliers, the reduction on the steel supply side for galvanized coil products is heard to be at between €20/tonne and €40/t, according to the manager.
The big carmakers had aimed to secure signatures early on in negotiations for direct steel supplies, and accepted higher prices at an early stage, the manager says. Carmakers are now pressuring automotive component suppliers to compensate for the fact steel prices have softened in the summer, the manager believes.
Christian Koehl Germany
