No room for declines in steel coil contracts: Mills

European steelmakers have no scope to reduce coil contract prices for January-June 2024, they told Argus at a trade fair in Germany.

While mills and buyers concede that demand is weak, there is a consensus that margins have bottomed out.

Producers have been losing money for months and can no longer afford to do so, they told customers. Offers for the first half of next year have been tabled at a rollover to July-December — €750-800/t — buy and sell-side sources said. Some mills suggested increases, but it is clear their intention is also to secure a rollover. One large European producer said it will not enter negotiations until buyers understand that no decrease is possible, although it agreed increases are unlikely, given low demand.

Spot indexes are not a reference for longer contracts for higher-value added material, the mill source said. At the same time, mills are working hard to shore up spot prices, in an attempt to close the spread to the contract levels they are trying to achieve.

Automotive-facing service centres said they would be content with rollovers, provided this was the same result achieved with end-users. They so not want to pay the same price only for original equipment manufacturers to secure decreases. After months of sitting on depreciating inventories, service centres are also ready for increases, although they question how easily they can be passed off to reluctant end-users.

Mills also alluded to the threat of dumping investigations into overseas producers, particularly in Asia, which they claim are selling below cost into the EU, despite a much lower cost base than domestic mills. In July, Asian producers had over 70pc of the EU HRC import market. Vietnam alone accounted for nearly 25pc, Taiwan 14pc and Japan 13pc. Japan was named in a recent dumping investigation in Turkey, and has been quieter in the European market of late.

By Colin Richardson