FRANKFURT, June 26 (Reuters) - Major steel producers will drop multi-year price deals with carmakers and suppliers as a result of volatile steel prices, an automotive industry paper reported, calling it bad news for steel customers.
"There will be no more multi-year contracts," Automotive News quoted Freek Schut, automotive commercial manager at Europe's number-two steel producer Corus , as saying in a report released ahead of publication on Monday.
"We are now quoting prices on a yearly basis and we are not even quoting for 2006 yet," he added.
World steel prices doubled last year, putting heavy price pressures on automakers and parts makers, but some were able to escape the brunt of the price rises thanks to long-term contracts with fixed prices.
Arcelor , the world's top steelmaker, also is expected to restructure its contracts with automakers and suppliers, the paper reported.
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," it quoted Patrick Seyler, Arcelor's corporate communications executive vice president, as saying.
"Last year's price movements made us question whether three-year contracts without adjustment clauses were realistic in such a volatile environment."
It also cited an unnamed European supplier executive as saying that many multi-year contracts that ended last year had already been converted to three- and six-month contracts.
The changes in contracts will hit automakers by making their forward costs less predictable, the paper noted, but added that suppliers could be worse hit.