Outstanding European coil contracts could see higher prices

Northwestern European coil buyers that are still in the process of bargaining for long-term supply contracts with steelmakers might end up with higher prices than agreed-to so far, with the major car brands, for instance.

According to one mill manager, upcoming agreements could see somewhat higher prices than those struck previously, as spot market prices have proceeded climbing slightly since December. The difference will not be massive, as the upward trend proceeds slowly. Mills are still struggling to obtain close to €600/tonne ($630) ex-works for hot-rolled coil, with €620/t called as the new target by at least one mill.

Whilst the spot price is certainly a factor in the negotiations, the main indicator is the prices resulting from the previous year’s talks, the same manager emphasises. Long-term supply relationships involve services and reliability and therefore work differently than the spot market, which is very much influenced by the pricing of imports. As a rule of thumb, contract prices can be €100/t higher than spot prices.

Compared with the contracts signed one year ago, prices accepted so far in January are €60-80/t lower, Kallanish hears from sources at mills, automotive suppliers and service centres. One experienced independent observer expressed doubts though. He says the reductions were greater, closer to the €100/t mark.

“The people I talked to signed at a year-on-year reduction of between €85 and €95,” he says, adding he has not heard of deals at minus-€70 or less.

Other than the parties involved, that source offers a concrete figure for the outcomes, which he says were at €650/t for HRC. And, he says mills aim to reach closer to the €700/t mark in annual contracts that are still outstanding.

Christian Koehl Germany

kallanish.com