Summer saw the return of optimism over the European carmaking industry, as it resumed production after months of lockdown, giving a boost to coil prices which have surged since August.
According to one observer, some mills are already suggesting a premium of €100/tonne ($116) over last year in the coming negotiations for long-term contracts. A mill’s manager says that no internal discussions on that have occurred so far. Still, he believes in increasing demand, and that hot-dip galvanized coil will fetch more than the current €600/t in January.
Some however warn it is too early to be cheerful. “I put a big question mark over the real demand of carmakers,” a German service centre manager tells Kallanish. He refers to the announcement of redundancies at suppliers like Continental, and automotive production figures turning down again.
The year-on-year drop in German car production in July was merely -6%. But in August it was a massive -35%, corresponding with the cumulative January-July on-year decline.
This is partly attributed to later holidays this year than last, but it also raises concerns. “The mills are pumping their material to the carmakers, but if VW and others step on the break again, mills will too, and with a delay,” the manager says. “If the coronavirus comes back with a vengeance, automotive can only lose.”
A Dutch buyer agrees. “The Netherlands and the UK could well see another lockdown,” he says. He finds the outlook for car production is too uncertain to provide a safe basis for large coil price hikes, especially since carmakers are reluctant to go for contract periods longer than one quarter.
