Northwest European coil mills seek earlier annual contracts

Negotiations this year on long-term supply contracts for coil products to carmakers and other big customers for 2022 could ripen much earlier than in other years.

Normally, the partners wait for the big German sheet trade fairs to occur in late October to get serious about deals. This year, it will be the Stuttgart Blechexpo, which takes turns annually with Hanover Euroblech. However, it appears mills are striving to make negotiations and come to conclusions earlier, partly because of the long lead times that need to be taken into consideration at present.

A value that sounds like a possible target for hot rolled coil is €1,100/tonne ($1300) ex-works, which was heard quoted last month by Salzgitter to a conference of analysts. The value sounds low in the current market environment. Several sources tell Kallanish that the likes of Salzgitter keep targeting €1,200 for spot deals, although many transactions have undercut €1,150 by now.

The explicit figure of €1,100 is thus likely to apply for long-term contracts, negotiated in an environment of softening prices. This explains why mills maintain €1,200 for spot deals on the higher end. “They will keep that up until the [annual] contracts have been closed,” the manager of one German service centre believes.

However, factors such as dropping raw materials prices and cheap imports could easily put pressure on the figures targeted in the negotiations, especially if they keep dragging on.

Christian Koehl Germany