In contract negotiations for coil supply in the second half-year, the positions of mills and buyers have come closer together. Mills have actually made concessions after first asking prices were rejected across the market.
The main factor for prices in such negotiations is the comparison with the figures struck last time, of course also taking into consideration the current spot market level. In June, the initial offer from mills was to ask for €100/tonne ($108) on top of the prices achieved in December/January talks for H1 2023.
Buyers dismissed that claim, in view of the overall lull in the market and given spot prices continued their downward trend. The asking price was “totally unrealistic and without reason”, one buyer at a German processor tells Kallanish.
Against that, mills cite rising production cost and the fact that December saw the start of an unforeseeable price surge. Many early contracts then were signed at below €800/t for hot rolled coil, a figure that was easily overtaken by the spot market price two months later. In long-term contracts, buyers accept a premium of at least €100 over the temporary spot price, as a warranty for supply safety.
The managing director of another German processor confirms the impression that mills are now going for a rollover, or in some cases still trying for an increase. He notes they “defiantly reject the idea of a price lower than last time.” He tells Kallanish that talks are still dragging on, but he believes the overall positions will not modify much further.
Christian Koehl Germany