German steelmaker ThyssenKrupp is trying to renegotiate auto automotive contracts for 2022 finalised around January, according to market sources.
The mill, which is heavily exposed to the automotive sector, wants to restore the kind of margins it initially achieved and pass on further increases in raw material costs. It is seeking increases of €300-320/t, according to sources at automotive companies.
No letters have been sent yet, but talks with original equipment manufacturers will start in the coming weeks. Half-yearly deals with service centres and tier suppliers will not be renegotiated at this time.
The mill finalised its auto contracts in the region of €900-1,000/t base depending on the customer and will be looking to move this towards €1,200/t and above, closer to spot levels — Argus‘ benchmark northwest Europe HRC index, the settlement basis for futures contracts on the LME and CME, had risen from €900/t at the start of January to €1,387.50/t yesterday. The benchmark has jumped by €417.50/t this month alone.
The cost of raw materials used by blast furnace-based mills, adjusted for consumption rates, had risen from $536/t at the start of January to $871/t yesterday, without accounting for increases in energy costs.
Automakers are unlikely to acquiesce to the renegotiation, which threatens the very fabric of the bilateral annual pricing mechanism, as the initial accords were concluded at record levels and at increases of €400-500/t on 2021 deals. It remains to be seen whether other mills will follow suit.
By Colin Richardson
