The steel prices under pressure of iron ore and coal prices rose sharply in 2010. The new system a lot of iron ore contract prices affect the stability of prices of iron ore and coking coal prices, as raw materials in the steel industry. Last year, the average cost of steel makers’ production of steel used in construction and make the car, ranging between 220 USD and 254 USD per tonne.
The manufacturer of the steel company, ArcelorMittal said that now 80% paid more for raw materials like iron ore and coking coal, the main ingredient for making steel, a year ago. Steelmaking costs € 130 per tonne, he said.
Last year, the average cost of steel makers’ production of steel used in construction and make the car, ranging between $ 220 and $ 254 per ton.
With iron ore contracts to switch to a quarterly system of an annual benchmarks established by the industry for many years, steel producers are concerned that the cost of commodities such as iron ore will remain unstable .
CFO Aditya Mittal said ArcelorMittal increased raw materials will not be a fourth time, but something felt through the fourth quarter of 2010. ArcelorMittal is about 45% self-sufficient in iron ore that will be buffered a bit.
Steelmakers will now negotiate the price of iron ore each quarter, minors and the price is determined by a combination of factors, including taking the spot price for imports in China and adjusting prices to the cost differences freight and ore quality. This means that the costs for steel producers will change every few months, rather than having a fixed price throughout the year for materials processed as before.
Steelmakers have always bought equipment on an ad hoc basis, but now it will become the norm. German steelmaker ThyssenKrupp has said he will fight for a return to annual contracting – but ArcelorMittal has said he believes that the trimester system is here to stay, unless the miners of iron ore negotiations resolve most Regular contract are not in their interest.
About 1.6 metric tons of iron ore and about 0.6 tons of coking coal is used for every ton of steel produced.
The spot price of imported iron ore to China is already up 45% from late December to about $ 173 a metric ton, steel index data shows.
How to manage the rise of steel will be the key. ArcelorMittal said it intends to pass the rise down to customers such as automakers and is currently meeting with customers to discuss changes in how it makes its contracts – to suit iron ore new system of quarterly prices.
“Customers on long-term contracts will have to adapt to the system of quarterly price, CEO Lakshmi Mittal. Approximately 50% of its current contracts are being negotiated at present.
The price of steel worldwide average is up 12% in April, the month to month, and more increases are coming, rising commodity prices take effect from April.
The association of European car industry trade already anticipated this problem and in March complained that rising raw material and steel prices and the increase will strain and damage competitveness manufacturing in the region and asked the European Commission to fight against what he perceives as “distortion” of prices by the majors iron ore mines.
Source: blogs.wsj.com
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