Automotive suppliers consider OEM steel purchase pooling
German carmakers and automotive suppliers might have to reconsider their method of negotiating with steel mills over annual coil supply contracts.
Automotive tier suppliers often feel the most hard done by in the talks, in which mills on one side and OEMs on the other are the bigger and stronger opponents. In this triangle, tiers are traditionally the ones that end up paying higher prices to the mills for steel, but receiving lower prices from the OEMs for the steel component in the parts they supply (see separate story).
In comparison with last year’s relatively high prices, “the mills this time conceded €50-80/tonne [$52-83] lower prices,” says a manager at an automotive supplier. This figure was also heard from other sides. But in the negotiations for finished car parts, OEMs are heard entering the talks requesting a year-on-year reduction of €100/t or more for the steel component.
Tier supplier say they could withdraw from purchasing steel individually. Instead, all steel negotiations would be put in the hands of the OEMs in a practice called pooling-by-retail, with one valid price for all coil distributed among all players in the chain.
According to the manager, pooling in France accounts for 90% of all negotiations, but for far less than 50% in Germany. So far, German negotiators trusted their own expertise most, but the squeeze in recent years has made them increasingly willing to hand over that responsibility. After all, pooling itself is a cost factor for the OEMs, with the need for additional personnel in times when VW and Ford have announced staff cutbacks. “And mills do not like pooling much, because of the same reason,” he tells Kallanish.
“We want fairness from the OEMs, not better deals,” the tier manager emphasises. “We are the sausage in the sandwich,” he adds.
Christian Koehl Germany
BDS: German steel sales slump, stocks hit 3-year low as of Dec 2024
German total steel sales product fell 0.59% year over year in December 2024 to 462,264 mt, and down by 40.64% month over month, data from German steel stockholders’ association BDS showed on Jan. 22.
- Total steel sales in Dec 2024 drop 0.59% YOY to 462,264 mt
- Total steel stocks in Dec 2024 decline 3.96%YOY to 1.78 million mt
Last month, sales of the flat steel product category nearly halved to 281,045, down 40.23% from November and 3.05% from the same period in 2023, respectively.
Long sales also dropped to 136,204 mt, down from 143,297 mt in December 2023 and compared to 238,850 mt in November 2023, the data showed.
Other products stood at 45,015 mt in December 2024, down 40.9% year over year and 35.39% month over month.
The BDS data also showed that steel stocks in Germany went down year year over year and month month over month. Total German steel stocks products totalled 1.78 million mt in December 2024, slipping 3.96% compared to the same month of 2023 and down 1.54% from November 2024 to the lowest level since records started in January 2020.
Flat products decreased by 4.64% to 1.11 million mt in December, year over year, and by 2.77% month over month, respectively.
Long products stocks totaled 638,548 mt in December, down 2.10% year over year but up 0.95% month over month. The rest of the stocks under “Others” stood at 30,762 mt in December, down 6.42% compared to December 2023 and down 1.54% relative to November.
In December hot-rolled coil prices in Northern Europe moved sideways from Eur560/mt base ex-works Ruhr to Eur 560/mt ex-works Ruhr on Dec. 30, with prices that moved down by around Eur130/mt in 2024. Platts, part of S&P Global Commodity Insights, assessed hot-rolled coil in Northwest Europe at Eur580/mt ex-works Ruhr Jan.21, stable day over day
Private consortium increases non-binding offer to acquire German steelmaker Salzgitter
The consortium consists of GP Günter Papenburg AG, who currently holds 25% shares of Salzgitter and German major recycler TSR Recycling GmbH & Co KG.
“We can confirm that a non-binding offer has been submitted to Salzgitter AG, stating an indicative offer price of €18.50 ($19.28) per share, and that [Salzgitter] is in talks with the consortium,” Salzgitter’s spokesperson told Fastmarkets.
After the news emerged, Salzgitter’s share prices on Frankfurt Stock Exchange jumped to €16.62 per share on January 23, compared with €15.78 per share on the previous day.
“As soon as a formal offer has been received, the Management Board and the Supervisory Board will comprehensively review and evaluate it in accordance to legal obligations,” Salzgitter’s spokesperson added.
In November 2024, GP Günter Papenburg AG and TSR submitted a non-binding offer, but at €17.50 per share, several sources told Fastmarkets.
The consortium is looking to achieve an aggregate shareholding of at least 45% plus one share, including the shares already held by the German construction company, Fastmarkets previously reported.
Currently, the German state of Lower Saxony is the largest shareholder in the company at 26.5%, according to Salzgitter’s data. GP Gunter Papenburg currently owns a share of 25.1%, and Salzgitter has 10%. The rest of the shares are distributed among other retail and institutional investors.
“In recent months, the state government has held intensive discussions on the plan for a possible takeover of Salzgitter AG by the Papenburg Group and TSR. According to the considerations known to the state so far, no economic advantage or contribution to the sustainable development of Salzgitter AG could be seen from the proposed conditions,” a statement from Lower Saxony’s Ministry of Finance, received by Fastmarkets on January 23, said.
“New and more specific conditions have now apparently been proposed to Salzgitter AG, which must first be examined and evaluated by the board of directors of Salzgitter AG. The Ministry of Finance is not yet aware of the proposal in detail…The state does not plan to sell its shares in Salzgitter AG,” the statement said.
Market brief
Salzgitter currently runs three blast furnaces with a combined capacity of about 4.8 million tonnes per year of crude steel. The company produces hot-rolled coil, cold-rolled coil, electro-galvanized, hot-dipped galvanized and organic coated steel sheet.
The company posted negative financial result for the first nine months of 2024, according to the latest reported published in November 2024.
Company’s steel sales in January-September 2024 decreased by 8.07% compared with the same period of time in 2023 to €7.7 billion. For the same period the company’s earnings before interest, taxes, depreciation and amortization dropped by 44.3% year on year to €320.6 million.
Earnings before interest and taxes was at a loss of €54.6 million compared with a profit of €341.6 million in January-September 2023.
Market conditions in Europe have remained challenging, with real steel consumption deteriorating, with the construction sector in particular suffering from weak demand — under pressure from higher interest rates and rising building costs.
In October 2024, Fastmarkets daily steel HRC index, domestic, exw Northern Europe averaged €549.25 per tonne, the lowest level since November 2020, when the index averaged €530.72 per tonne
This report was updated to include quotes from Lower Saxony’s Ministry of Finance on Thursday January 23.
German fabricators support ‘SOS Industries’ campaign
Germany’s association of steel and metals fabricators, WSM, is supporting a nationwide campaign to raise awareness for the critical state of Germany’s industries, Kallanish understands.
The campaign is called Wirtschaftswarntag (SOS Industries), and has been organised by an alliance of more than 50 industries associations, mostly representing small and medium-sized enterprises. The campaign has set up a large rally at the Brandenburg Gate in Berlin on 29 January.
“The code for emergencies at sea, SOS, in this context stands for ‘Save our small and medium-sized enterprises’,“ says Christian Vietmeyer, managing director of WSM. He cautions that the campaign is not a mere test alarm. “We are already on the edge of tipping over,” he warns.
The main rally in Berlin will be preceded by regional campaigns all over Germany, often including regional metals working and construction associations. The Wirtschaftswarntag means to set a signal to political parties in the run-up to the new governmental elections in February.
“Our aim is to wake up the nation, so that the focus of the election campaigns and the of the new government will be a policy that leads Germany back to economic strength,” organisers state.
Christian Koehl Germany
German steel output increases, remains below historic norms
Crude steel production by German mills in 2024 was 5% higher than the year before, totalling 37.2 million tonnes, according to national steel federation WV Stahl.
Still, the overall production activity in Germany remains broadly in recession mode, WV Stahl notes, as output has been lower than 40mt for three years in a row. Other economic data contribute to a gloomy picture, Kallanish hears from the federation. Demand remains at a critically low level, and market supply has hit a historic low with an annual total of 27mt of finished products, 7% less than 2023.
Since 2017, the German market lost one-third of its previous volume, in contrast to overseas economies and other industrial EU nations, WV Stahl points out. With a view on the upcoming governmental elections, managing director Kerstin Maria Rippel calls on policy-makers to take measures to lead Germany back to strength as an industrial powerhouse.
The country hurts especially from the combination of low-priced imports and uncompetitive costs for electricity, Rippel says. The grid fees alone last year imposed extra costs of €300 million ($313m) for steelmakers. With US President Donald Trump taking office, Germany and the EU can no longer hide behind the argument of World Trade Organisation compatibility, she says.
In detail, crude steel production on the oxygen-route rose by 3.3% to 26.4mt, whilst EAF production went up by 10.2% to 10.8mt. The EAF-route increase is stronger, as 2023 was affected by an unusual temporary peaking of power prices, which lead to reduced activity.
That same effect can be seen in the figures for December 2024, when EAF production fell 3.1% year-on-year. Germany’s power supply was again affected by peaking prices due to a shortfall in renewable energy last month and again this month.
Christian Koehl Germany
Another German mill pauses due to power-cost spike
A sudden surge of power prices in Germany has caused special bar quality mill Georgsmarienhütte to suspend production, Kallanish understands.
In a post on LinkedIn, managing director Anne-Marie Grossmann writes that production had to be stopped Monday morning. The day-ahead electricity price that morning had reached €432/MWh ($449). By comparison, sudden peaks prior to 2019 would never go beyond €130/MWh, Grossmann notes. She expresses outrage about “a failure of energy policy in Germany – the land of engineers and innovators” and how it falls behind other countries that have lower energy costs.
GMH is not the first steelmaker that stopped production this winter because of power price peaks. In December, Feralpi’s rebar mill in Riesa suspended output for two days amid a sudden surge in power prices that compounded the difficult market situation (see Kallanish 16 December). Back then, the power prices on the spot exchange climbed as high as €900/MWh.
The surges are attributable to a low in wind and solar power production after a long period of overcast skies with little wind. Such occasional “dark lulls” (“Dunkelflaute”) are becoming symptomatic in Germany, which is trying to change its energy supply towards renewables, mainly wind and solar energy.
Hence, Grossmann especially attacked the political trend of abolishing nuclear and fossil power generation too quickly before a stable supply from renewables can be relied on. According to Berliner Zeitung, GMH already adjusted its production rhythm of its electric-arc furnace to shorter shifts in early January. The newspaper cites company sources as saying that the mill is nevertheless maintaining its capacity to guarantee deliveries to customers.
Christian Koehl Germany
German car production ends 2024 flat on-year
German passenger production last year came to 4.1 million units, about the same as in 2023, German automotive association VDA reports. December alone, however, saw production drop by 10% compared with December 2023.
This means there was a notable slowdown in the rebound in production seen over the last two years. In 2023, output from German plants rose by 18% year-on-year. In 2022, production increased by 11% on-year, recovering gradually from the shortage of semiconductors that dominated 2021.
However, compared to the pre-Covid year of 2019, 2023/24 output was still 12% lower, the association notes.
In its latest report, VDA provides some detailed production data for electric vehicles until November 2024, broken down by drive type. They show that in November, more electric cars were produced in Germany than in any previous month. Output amounted to 155,700 electric cars, up 29% on-year.
At 120,500 units, more battery electric vehicles rolled off production lines in Germany in a single month than ever before, Kallanish hears. In addition, 35,200 plug-in hybrids (PHEs) were produced.
In total in the first 11 months of 2024, almost 1.3m electric cars were made in Germany. This is already more than in the whole of 2023, VDA notes.
Christian Koehl Germany
Germany posts strongest output growth rate among top-10 steel-producing countries
Global crude steel production increased by just 0.8% to 146.8 million tonnes in November compared with the same month in 2023, but output fell by 1.4% year on year from January to November, worldsteel said on Monday December 23.
Germany
Crude steel production in Germany was up by 8.6% year on year to 2.9 million tonnes in November, according to worldsteel, with the output of Europe’s largest steel producer also up by 5.3% in the year to November compared to the same period in 2023 (see chart below).
Sources said the was probably mostly due to the decline in October and November 2023, when production cuts were introduced to balance supply and demand in the European steel market.
The increase could also be partially driven by the increase in the production of semi-finished steel products for export as a substitute for sanctioned Russian material.
The European Union’s 27 member states also reported a combined increase in crude steel production in November compared with the same month in 2023, with output up by 3.9% to 10.7 million tonnes. The year-on-year rise from January to November was 2.2%, with output reaching 119.9 million tonnes.
But despite the increased output, sources said that demand for finished flat and long steel products remained sluggish across Europe, with oversupply frequently cited as one of the main reasons hindering a stronger price rebound.
India
India was the second top-10 steel-producing country to record a significant increase in crude steel production in November, with output up by 4.5% to 12.4 million tonnes compared with the same month in 2023.
Output for the year to November was also up, increasing by 5.9% compared to the same period in 2023.
And larger steel mills in India recently tried to increase domestic finished steel prices.
A slight price rebound was achieved on expectations that the Indian government might impose provisional duties on steel imports before the completion of a safeguard investigation announced on December 19.
Earlier in December, India’s Ministry of Steel proposed a 25% safeguard duty on imports of all major flat steel from other Asian countries, such as Japan, South Korea, and Vietnam.
But the higher prices for HRC struggled to gain tractions, with demand for steel failing to match the increase in supplies following the capacity additions by all major steel mills in India since March, Fastmarkets understands.
China
In China, crude steel production moved up 2.5% year on year in November to reach 78.4 million tonnes, but output was down by 2.7% from January to November compared with the same period in 2023 and slow domestic consumption in the world’s largest steel-producing country remained a major concern.
To compensate for the sluggish domestic consumption, China has focused on exports in recent months, sources told Fastmarkets, and despite exports falling month on month in November, compared with the same month in 2023, volumes shipped out of the country increased, according to preliminary data ffrom the General Administration of Customs.
Steel exports amounted to 9.28 million tonnes in November, which was down by 17% from 11.18 million tonnes in October, but up by 16% from 8.01 million tonnes in November 2023.
But competitive Chinese steel prices in overseas markets resulted in an increase in trade protectionism around the world.
Russia
Estimated crude steel production in Russia fell by 9.2% year on year in November, to 5.5 million tonnes, worldsteel said, with output also down by 7% in the year to November, compared to the same period of 2023.
Key steel consuming industries in Russia were unable to generate sufficient demand to maintain high production rates in the country.
Russian iron and steel export volumes fell to 15.5 million tonnes in January-October 2024, according to data from Global Trade Tracker – 23,9% lower than the same period in 2023, due to international sanctions imposed following Russia’s attempted invasion of Ukraine.
In addition to countries and companies rejecting Russian steel exports, the prices achievable in the few countries still willing to do business with Russia have continued to fall.
VW scraps plans to close plants in Germany, opts for massive cuts in output, jobs instead
“The [steel] market sentiment is pessimistic, especially in Germany, where many companies are sizing down [operations] and announcing layoffs,” a trading source in Germany told Fastmarkets on Monday December 23.
Following several strikes and over 70 hours of collective bargaining, VW and trade union IG Metall have finally reached the agreement “Zukunft Volkswagen,” which shapes the company’s future until 2030, VW said in a statement published late on Friday December 20.
VW’s board of management was initially pushing for the closure of three car-making plants, which was averted, but massive layoffs and production cuts have been announced.
Notably, a reduction in capacity of 734,000 units across German plants is planned before 2030, and the workforce will be reduced by more than 35,000 people across VW’s German locations by 2030.
IG Metall said they were satisfied with the results, though.
“That is correct, [there will be job cuts]. But you have to consider that the ‘job cuts’ will be socially responsible, meaning there will be solutions through part-time retirement etc.,” IG Metall’s spokesperson told Fastmarkets on Monday.
IG Metall said in a statement seen by Fastmarkets, “Although there are concessions under the collective agreement beyond the monthly income [i.e., changes in bonuses and holiday pay], these are offset by the solidarity-based safeguarding of all sites, including future prospects [and] a new job protection until the end of 2030.”
The jointly declared goal announced for the Volkswagen Passenger Cars brand, the core of Volkswagen AG, is to become the technologically leading volume manufacturer globally by 2030.
“The comprehensive capacity reduction across the German plants and significant and sustainable decrease in labor costs of €1.5 billion ($1.56 billion) per year as part of the ‘Zukunft Volkswagen’ agreement have now created the financial conditions for this goal,” VW said in a statement on Friday.
Altogether, VW aims to save over €15 billion per year in the midterm.
Restructuring of manufacturing sites
The electric cars ID.3 and Cupra Born will be built in VW’s Wolfsburg plant. Golf and Golf Estate production will shift from Wolfsburg to Mexico in 2027, but an electric Golf and an electric vehicle (EV) based on the modular car platform Scalable Systems Platform (SSP) will be made in Germany around 2030.
As a result, production will be focused on two assembly lines instead of the current four.
The Emden plant will continue to build the EV models ID.4 and ID.7.
The Osnabrück factory will stop production of the T-Roc Cabrio in mid-2027. “Options for a different use of the site are currently being explored,” VW said.
Zwickau will focus on one production line as of 2027, building the Audi Q4 e-tron and the Q4 e-tron Sportback.
The Dresden plant, known as the Transparent Factory, will halt production before the end of 2024. It currently builds the ID.3 model; VW said they’re working on alternative options for the plant.
The Volkswagen Group Components sites in Kassel, Braunschweig, Salzgitter, Hannover, Wolfsburg and Chemnitz will be retained, but these locations will have new working time models to make production capacities more flexible.
European automotive sector in decline
Output from the EU’s automotive sector is expected to decline in 2024, according to the European Steel Association’s (Eurofer) latest quarterly report, published at the end of October.
The sector is expected to decline by 6.5% in 2024 (revised downward from a 3% decline in a previous outlook) and to increase by just 1.9% in 2025 (revised downward from a 2.3% growth), the association said.
New car sales fell by 1.9% in Europe this November, dragged down by a 9.5% drop in overall EV sales, including a 21.8% slump in German EV sales, according to data from the European Automobile Manufacturers Association (ACEA), published on Thursday December 19.
VW said in September that annual European car demand should level off around 14 million vehicles, down from 16 million before the Covid pandemic.
Steel sector under pressure
The automotive industry is the second-largest steel-consuming industry after construction, according to Eurofer, so the steel sector “feels” the decline in consumption.
“We had around 20% fewer orders from the automotive sector year on year [in October-December],” a steel service center source in Germany told Fastmarkets.
A German buyer said, “The missing investments create no demand; therefore, all flat steel producers in the EU have obtained, for months, only minimal orders from the automotive industry.”
And the trading source in Germany said, “On top of that, Germany is effectively without [a] government. A newly elected government can’t be in power until around April 2025, at best. Such a long waiting time is poison for any investor who needs security for their planned projects.”
Negotiations between steel mills and original equipment manufacturers (OEMs) in the automotive industry for hot-rolled coil contracts for the first half of 2025 and the full year were still under way.
In the week to Friday, several sources reported some closures of half-year contracts between steel mills and automotive OEMs for the first half of 2025, with a discount of €80 per tonne compared with the second half of 2024.
Some contracts were heard done at €650-670 per tonne, compared with €730-750 per tonne in the second half of 2024, sources told Fastmarkets.
Initially, automakers were asking for a more substantial discount of €100-150 per tonne, Fastmarkets heard.
But in the spot market, European mills have been trying to push for higher prices recently.
“Mills are trying to increase spot prices in an attempt to bring down the gap with long-term contracts that they are currently negotiating with the automotive industry,” a second buyer source said.
Fastmarkets calculated its daily steel hot-rolled coil index domestic, exw Northern Europe at €565.00 per tonne on Friday, up by €2.50 per tonne week on week and by €3.33 per tonne month on month.
Vallourec sells former German plant property
Vallourec has entered into an agreement to sell the majority of its Düsseldorf Rath property to CTP, Europe’s largest publicly-listed industrial property developer, Kallanish learns from the French pipemaker.
This will involve the sale of the approximately 900,000 square meter property for €155 million ($126.6m). The site was home to Vallourec’s primary tube production operations in Germany, which closed at the end of 2023 as part of the New Vallourec plan.
The transaction is expected to close around year-end, subject to customary closing conditions, including CTP’s receipt of the waiver of the city’s pre-emption right, the pipemaker notes.
“This transaction marks a major milestone for Vallourec, as we have now finalised the closures and sales of all of the major European assets targeted by the New Vallourec plan in less than three years,” says Vallourec chief executive Philippe Guillemot. “As a reminder, 80-100% of cash flows generated in the second half of 2024, including the proceeds from the sale of this facility, will be eligible for return to shareholders.”
Earlier, Vallourec announced it is divesting a logistics hub in Indonesia as part of its initiative to concentrate on its main operations (see Kallanish passim). The pipe manufacturer plans to divest its interests in PT CPPI and PT SCN, referred to as the Logistics Group, to CKB Logistics, a subsidiary of ABM Investama Tbk, for an estimated €20m.
Vallourec is also partnering with Advanced Supply Management Operations (Asmo), a joint venture between DHL and Saudi Aramco formed earlier this year, with a view to increasing its Middle East and North Africa market share.
Svetoslav Abrossimov Bulgaria
