ArcelorMittal to boost steel prices
ArcelorMittal, the world's largest steelmaker, plans to boost prices on some contracted steel shipments in the US by $250 a ton to recoup surging costs for energy and iron ore.
The surcharge will be added to all orders of flat-rolled steel for shipment May 5 and later, according to an April 14 memo to sales personnel from D.G. Mull, executive vice-president for sales and marketing. The Luxembourg-based company won't add the charge to spot sales or contracts that already allow prices to fluctuate, the memo said.
ArcelorMittal wants to take advantage of soaring global demand to pass on higher costs for iron ore, the main ingredient in steel, and the energy to produce and ship the metal. US prices for flat-rolled steel rose to $740 a ton in March from $665 a month earlier, according to Purchasing magazine.
"The key is going to be, does everybody else go along with this?" said Charles Bradford, a metals and mining analyst at Soleil Securities in New York. "You can bet that the auto guys are going to be yelling and screaming about it."
US steel prices are climbing even as demand stagnates because higher prices in other regions and a weak dollar are attracting the exports usually destined for North America. Hot-rolled coil, another key industry product, may now cost a record $1,000 a ton on the spot market, according to Robert Miller of Miller Mathis, a New York investment bank focused on steel.
"This is a pretty gutsy move, testing the contract provisions," said Scott Burns, an analyst at Morningstar Inc in Chicago. "I can imagine if they signed contracts at $400 or $425 a ton they would want to bring prices up to spot levels."
ArcelorMittal spokesman William Steers didn't return a voicemail message seeking comment. Spokesman Adam Warrington didn't return an e-mail seeking comment.
ArcelorMittal earlier this month agreed to pay Cia. Vale do Rio Doce, the world's largest exporter of iron ore, 87 percent more for the ingredient. Vale is charging Asian steelmakers about 65 percent more.
"The steel industry has seen unprecedented volatility in 2008, primarily as a result of cost increases related to iron ore, coke, scrap, energy and transportation," ArcelorMittal said in the memo. "ArcelorMittal has attempted to mitigate the impact of these costs, however, the magnitude of the changes require us to implement a raw material surcharge."
The charge might add as much as $1 billion to costs at General Motors Corp next year, according to Soleil's Bradford.
The US needs to import steel, because domestic producers make only about 100 million tons a year, while the nation uses about 130 million tons. The weak dollar and higher prices in other regions have diverted supplies from the US.
"We believe that by the end of the year, the concept of fixed-price steel will be virtually done away with," said Michelle Applebaum, who runs a steel-equities research firm in Highland Park, Illinois. "The entire pricing mechanism was something that didn't exist until the commodity price deflation of the 1980s/90s, so it makes sense that this would disappear in the current environment," she said.
Agencies
(China Daily 04/17/2008 page17)
