German coil contract negotiations start early

Negotiations for coil contracts in Germany for the second half of 2021 have started earlier than in previous years, Kallanish hears from several market sources, although not everyone is aware yet.

Normally, talks do not start until late May/June, and some buyers at stockholders before Easter were still laid back about the topic, saying it was too early to worry. But according to a manager at a cold-rolling company – a segment of relatively big customers with a need for continuous input – various negotiations have started already, instigated by the mills.

“They [mills] signalled that they wanted to talk earlier than the typical June, so some talks are in full swing, and there have been agreements struck already, too,” he says. He hears that deals signed were between €200 and €300/tonne ($238-357) above those for the first half, depending on the time of the agreement, given the extreme momentum of prices these days.

In fact, one other big buyer was very early with striking his deal, in late February, and got away with a premium of €180 over the last negotiation round. In that case, it was him instigating the talks proactively. “I wanted to get things clear early, as I did not see prices getting any weaker going forward,” he says.

Negotiations for long-term contracts occurred earlier than usual last autumn in October/November, rather than in December, when mills pushed buyers into signing quickly, encouraged by the initial recovery of prices. Buyers were in a state of panic, and ready to accept year-on-year premiums of €100/t. Hardly anyone expected the massive further surge that would follow, so many buyers got away with favourable deals of around €500/t for hot rolled coil.

Christian Koehl Germany