EU HRC: German mill finalises some auto deals

A German steelmaker has secured €10-15/t increases in some of its annual contracts with automakers for 2019.

This follows another mill in Germany getting a rollover with at least one original equipment manufacturer, while other sellers are still pushing for increases after getting carmakers and auto-service centres to the point where they will accept rollovers.

Such levels may not be possible for contracts with automakers and suppliers in the UK, where the situation is more complicated than the rest of Europe. Brexit is fuelling uncertainty alongside the other factors impacting mainland European carmakers — primarily the rollout of the worldwide harmonised light vehicle test procedure and move away from diesel.

Auto-galv stockists in the UK have been looking for other markets to sell material into, and this has also been the case for some in Europe.

The UK steel market in general has been tough. Turkish offers have fallen to £500/t ddp West Midlands and below, and one domestic supplier has reduced its pricing to similar levels to win business. This means Turkish mills, which are struggling from competitive Asian material being sold into their home market, have to reduce offers further to compete.

Traders think they can sell Turkish supply at £490/t ddp West Midlands as a result. A lot of stockists have also bought a chunk of Turkish material, and may only be tempted to purchase more by price cuts. Benelux-produced hot-rolled coil was offered into the UK at £505/t ddp for February arrival, while some northern European material, for January production, was quoted at similar levels.

A Turkish re-roller has offered cold-rolled coil at £550/t ddp for February delivery.

UK service centres have been destocking as they do not buy into the narrative that prices will rise in the first quarter, when the European Commission's definitive safeguard is expected to tighten the market.

In the UK, as in mainland Europe, independent service centres are struggling to compete with mill-tied distributors. One service centre said it lost a cut sheet deal at as low as around £550/t ddp to a mill-owned distributor that has been heavily reducing its stock level.

One UK mill is choosing the southern European market as an export valve to the befuddlement of many in the market — a price of £500/t ddp equates to €565/t in Europe — a price that is nowhere near obtainable in Italy or Spain. Italian domestic prices are around the €480/t ex-works level. The mill has exposure to a domestic carmaker struggling with the move to diesel, but is not the largest supplier to the company.

Another seller said the mill in question has to rely on the spot market more than others as it has a slimmer contract portfolio.

The Argus northwest Europe HRC index was static today at €534.25/t ex-works.