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Contracts for the supply of steel to the automotive sector in Europe rose by 500 euros - MEPS

Europe / Business and Finance / Main

The European steel market began to gradually wake up after the New Year holidays in 2022. Because Epiphany was at the end of the first week of the year, many in the supply chain delayed their return to work until January 10th.

Contracts for the supply of steel to the automotive sector in Europe rose by 500 euros - MEPS

Roll manufacturers have completed negotiations on annual and semi-annual contracts with the automotive sector for 2022.

According to the British engineering agency MEPS, although all transactions are individual and details remain confidential, there is general agreement between the plant and the buyer that the agreed prices for 2022 are about 500 euros per tonne higher than the levels set for 2021 .

These new values ​​are likely to be used as benchmarks for future spot prices.

The discussion of long-term contracts went beyond the usual period (until the end of last year). This was due to uncertainty about demand in the automotive sector and a discrepancy between the starting point of factories and prevailing spot market prices.

In the second half of 2021, demand from the European automotive industry declined due to a shortage of semiconductors and other components. This created gaps in steelmakers' order books and delivery times were steadily reduced.

In addition, competition from steel suppliers from third countries has intensified. Distributors' inventories have been replenished as materials ordered earlier this year from both domestic and foreign facilities have arrived at their warehouses. As availability improved, shoppers began to delay placing orders. Prices for commodity rolled steel decreased against the backdrop of a decrease in consumer activity.

In addition, MEPS announced a price reduction for European contracts for the first quarter of 2022 for commercial quality flat steel. In contrast, mills supplying high-spec materials such as high-carbon cold-rolled coil and electrical steel negotiated substantial price increases under their agreements from January to March. Typically, in weak market conditions, the markup on the price of sheet versus roll is minimized due to strong competition between mills and service centers.

Another difference that has widened is in the difference between the prices of new products and stock items, as customers were willing to pay higher prices for faster delivery.

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