I recently posted about the effect of automotive contractual prices on overall steel pricing, and spotted this today at Stamping out a living.
‘There will be no more multiyear contracts,’ said Freek Schut, Corus’ automotive commercial manager. ‘We are now quoting prices on a yearly basis and we are not even quoting for 2006 yet.’
A European supplier executive, who didn’t want to be identified, said that many multiyear contracts that ended last year have already been converted to three- and six-month contracts.
Arcelor has a number of three-year contracts with automakers that end this December. ‘We will renegotiate these in the latter part of this year,’ said Patrick Seyler, Arcelor’s corporate communications executive vice president.
‘Last year’s price movements made us question whether three-year contracts without adjustment clauses were realistic in such a volatile environment.’
The steel maker’s policy has been to have three-year contracts with automakers and yearly deals with auto industry suppliers.
The changes in steel supply contracts will be bad news for automakers as it makes their forward costs less predictable, but suppliers could be worse hit.
Who would have thought that these deals would one day come back to the steelmakers and “bite them on the bum?”
I heard a “whisper” today that Corus may be considering a price reduction in Quarter three and spotted some news about Posco reducing prices in response to increased competition from China.
In view of the current “state of the market”, but totally unconnected, I am willing to make a little prediction!
The summer steelwork closures will be upon us soon in Europe, and the workers will head off for their vacations and the maintenance crews get to work on the steel plant. I suspect that one or two plants will be in need of some “extra” vital engineering that will lengthen the closure time. The fact that this will take some capacity out of the market will be just coincidental.