Northwest European coil buyers are in the process of re-stocking, and are receiving material as contracted despite fears mills would favour end users.
The supply shortage for coil products in northwest Europe since October has been especially painful for distributors and steel service centres (SSCs), which were last in line to be served by mills.
In times when they have limited volumes, mills prefer to sell directly to consumers, rather than to distributors, which add their own margins to the price, Kallanish hears from buyers on both sides. The beneficiaries of this game are often automotive suppliers and the actual OEMs, while inventories at distributors keeps depleting.
“I’ve seen halls in service centres where you could easily play football,” one source says of the empty stocks. “When demand came back, mills served the OEMs first, although in March it was the OEMs that had hurt the mills with their sudden stoppages of assembly lines and not taking in further material, while the blast furnaces still had to keep going,” another source observes.
In the meantime, most SSCs have signed deals with mills for supply in the first and second quarters, and, according to one buyer, deliveries are coming in as planned. “I was concerned that they [the mills] might hold back material in favour of customers who bought later at higher prices, but no, coils are coming in as contracted,” he says.
In November, when most quarterly contracts were struck, many buyers got away with contract prices of around €500/tonne ($607) for hot rolled and around €600 for cold rolled coil. Meanwhile, spot prices are now easily €200 higher in each category. And service centres are still in the process of refilling their inventories, which “…will last beyond February,” the buyer believes.