European mills maintain some long-term prices for 2023

Players on the northwest European coil market have no hurry proceeding with talks for long-term contracts for 2023, given the prevailing insecurity and unusual lull in business for this time of the year.

Numerous political and economic factors are depressing business and spot market activity, and make it even more difficult to establish a formula for long-term pricing. The reference to prior contracts is virtually grotesque in view of the record leaps spot prices have seen in 2022 so far.

Still, one mill indicates it will try to continue the prices agreed in mid-year. “For existing H2 2022 contracts for automotive, we will aim for a rollover as a bare minimum as again we need to recover inflationary cost,” one manager tells Kallanish. Spot prices for hot rolled coil sunk below the mark of €900/tonne ($895) in July, but held above €800 still for some weeks. This level would have to compete in negotiations with current spot prices claimed by mills to be still at €700, but seen dipping to €650 by buyers.

A comparison will be even more difficult with this time last year, when the Ukraine war was largely unanticipated. According to the mill manager, the prices struck for 2022 HRC contracts had their low end at €1,000. That sounds credible, as spot prices at end-2021 had just undercut that mark. Moreover, contract prices are typically higher than the spot market to ensure long-term supply security.

While current spot prices are €300-350 lower year-on-year, the gap for contracts might be less pronounced. “I believe we will sign at €200-250 below last year,” the manager of a processor company opines.

On contract lengths, the mill manager says that “we are contemplating shorter-term agreements but also happy to discuss annual contracts with OEMs, where we will aim for an increase to recover some of the additional cost we incurred.”

Christian Koehl Germany