European manufacturers of rolled steel are confident that time is playing into their hands in negotiations on annual contracts for the supply of products to automakers and other major buyers this fall.
The price discussion usually begins at the autumn German sheet metal exhibitions Euroblech and Blechexpo. Some participants have already started negotiations at the Euroblech trade fair in Hanover this week. Others believe that it is too early for them, especially since several metallurgical companies have decided not to participate in the exhibition this year.
According to market participants who have learned about the first offers, the contracts are offered to be concluded at about €100 per ton more expensive than current spot prices. This corresponds to €840-860 per ton of hot-rolled rolled products and €940-960 per ton of hot-dip galvanized rolled steel, representatives of factories and buyers told Kallanish.
One of the heads of the metallurgical enterprise warns that protracted negotiations are likely to be accompanied by rising prices under the influence of, as he put it, the "QCC" factor. He is referring to the impact of import quotas, the cross-border Carbon regulation (CBAM) mechanism, and increased production costs.
The difference between contract offers and spot prices of this magnitude is not uncommon: long-term agreements guarantee stable supplies and product quality throughout their duration. However, one of the buyers believes that the gap is too large in the current situation.
"The difference of €100 between the spot and contract price is clearly too large in the current market situation."
According to him, quotas and CBAMS affect the spot market, but they do not necessarily affect long-term contracts. It is precisely such agreements that underpin the business of European steel companies and their customers, who value local sources of supply.
At the same time, the head of the plant touched on a painful topic, recalling the situation three years ago. From October 2023 to February 2024, spot prices increased by more than €120 per tonne, and buyers who managed to complete transactions by December benefited the most.
Author: Adam Smith