Final long-term EU coil contracts eye settlement

The negotiations for annual supply relationships between European coil mills and large consumers, mostly in the automotive sector, have now largely been settled, with few still outstanding.

Most agreements were struck shortly after the winter break. By mid-December, one mill source said that agreements would not be completed before January, at least not with the big consumers. Smaller customers, such as service centres, had already spoken of finalised deals in early December.

Meanwhile, the mill source informs Kallanish that some annual and half-year agreements have been settled. “For the remaining contracts, the negotiations are in the final stage where the window between customers’ and mills’ expectations has narrowed down to around €10-20/t [$11-22],” he notes.

This is a noteworthy approximation, given that customers had initially asked mills to reduce their prices by over €100/t in comparison to the prices secured one year earlier.

Amid an already pitiful spot price environment, with sales volumes significantly restricted for several months now, big year-on-year annual contract price declines would have meant another blow to the profitability of mills. In December, many sources already reported increasing willingness by customers to make do with more modest reductions, as it would make little sense to starve their established suppliers.

According to the mill source, deals were now struck at a y-o-y reduction of €60-70/t, a figure confirmed from the side of automotive suppliers. One buyer tells of a reduction range struck with tier suppliers as well as with OEMs of €50-70, “with slightly more [deals] towards the higher end.”

He notes that deals with most mills have been completed, except for one group, “which is still playing hard-to-get, but they will be inclined to go in that direction, too”.

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