In the ongoing northwest European annual coil contract negotiations for 2024 with carmakers, automotive suppliers and other OEMs, the first signals of resolution have been heard this week.
Apparently, the tension created by the two sides being far off an agreement has now eased, much to the relief of the mills, who were preparing to come to terms with a price decline of at least €100/tonne. That was the tone heard from various sources on the buyers’ end, who said they would ask for a three-digit y-o-y reduction.
Last year, contracts struck early were heard signed at below €800/t, but many deals closed later would have been above that mark, as the talks occurred during a period of surging spot market prices.
Three digits could of course mean more than a €100 decline, with one manager at a large automotive supplier telling Kallanish last week that “we will enter talks with the proposal of minus €150”.
However, market chatter now tells of the first deal struck between a German carmaker and a mill at a reduction of around €50/t y-o-y, and that same manager says he is quite happy with the outcome. “The carmakers see that they ought to let the mills breathe if they want to keep them as suppliers,” he notes.
Mills are pressured by high input costs, power prices, and a critical lack of demand. Adding to that, they have been dismayed by the other negotiations they are partaking in, with union IG Metall demanding wage increases of 8% for steelworkers.
According to the manager, another big carmaker is eager to have its contracts secured in December still, and possibly with the same conditions as the previous outcome. The other carmaker, too, has lowered its request for a reduction from minus €100 to minus €50-60.
“That would set the trend for all smaller players, who follow the example of the big ones,” the manager says. “Once this happens, the avalanche cannot be stopped any more.”
Christian Koehl Germany