Supply Negotiations Favor OEMs Over Tier Suppliers
Automotive steel suppliers in northwestern Europe are facing renewed pressure as annual coil supply negotiations with steel mills suggest higher costs for tier suppliers compared to deals struck with OEMs (original equipment manufacturers).
Most contracts between steel mills and OEMs have been finalized, with agreements reportedly securing a €50-80 per tonne year-on-year price reduction—and in some cases, closer to €100/t. However, tier suppliers fear they will not receive similar concessions, potentially forcing them to pay higher prices despite overall reductions in steel costs.
A tier supplier manager emphasized that steel should be a neutral cost factor, ideally maintaining a 1:1 cost ratio between steel buyers and OEMs. However, this has not been the case for the past two years, threatening profitability in the automotive supply chain.
Steel Mills Push for Higher Pricing Amid Market Shifts
Despite earlier price reductions, mills are now pushing for higher pricing on tier supplier agreements, citing a €10-20/t increase in spot market prices since January. Although they may not achieve the €600/t+ ($622/t) target for hot-rolled coil (HRC), recent deals have surpassed €570/t, signaling an upward price trend.
Industry insiders argue that if steel mills aim for fair market pricing, they should have negotiated stronger deals with OEMs instead of passing higher costs to tier suppliers. A German service center buyer criticized the approach, stating that a lower price reduction for tiers compared to OEMs is "unacceptable".
With steel prices fluctuating, tier suppliers must navigate these cost pressures carefully, as their negotiation outcomes could significantly impact profitability and long-term sustainability in the automotive supply chain.
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