EU coil mills hold firm in contract talks

While mills are having a hard time keeping their coil prices up on the spot market, they appear more successful in asserting them in the outstanding talks for long-term supply contracts.

Most contracts of this type were finalised by early/mid-January, especially those negotiated directly between mills and OEMs.

“We completed all our talks with automotive customers in December,” one mill source tells Kallanish. He points ahead at negotiations the mill will hold in April for other contracts starting in the second quarter for some customers, mostly non-automotive.

Still, a smaller number of contracts that started in January have not yet been concluded retroactively, mainly with tier-1 type suppliers, sources suggest.

“We for ourselves have completed all contracts, but I did hear that mills are still negotiating with some of the tiers,” a manager of a cold-roller firm says.

Contracts closed earlier were signed at a lower price than one year previously, but the concessions turned out to be milder than feared by mills. Initially, OEMs wanted at least a €100/tonne ($108) reduction from last year’s figure, but eventually confined it to €20/t year-on-year. Some contracts ended with larger gaps, depending on the figure struck a year ago. Roughly, hot rolled coil has been secured by many for a little under €800/t.

Big customers were careful not to hurt their reliable domestic steel suppliers too much, whilst generous figures of annual contracts helped in pulling up the spot market prices in their wake. But the wind on the spot market has turned, and prices keep softening, to now around €730/t for HRC, or less. There is some doubt among market participants that this will affect the outstanding long-term contract talks.

“Mills have concluded the lion’s share of their contracts, and so they will not be willing to divert from the figures they secured earlier,” the cold-roller manager says.

His opinion is backed by the manager of a large German service centre. “Mills remain uncompromising and are keeping their talks separate from the spot market,” he says.

He states that mills are standing firm in case buyers from tiers ask for a discount on the volumes already delivered in January/February.

Christian Koehl Germany