Steel Buyers Face Surcharges for Raw Materials Costs
ArcelorMittal to add $250/ton on plate, sheet supply contracts
ArcelorMittal to add $250/ton on plate, sheet supply contracts
The world’s largest steelmaker is attaching a series of surcharges on flat-rolled products as a way of passing on rising raw-materials prices. Earlier this month ArcelorMittal advised its contract customers, including automakers and other large-volume buyers, that it is adding a $250/ton charge to all sheet and plate products shipped after April 20. Non-contract orders are being fixed with a $150/ton charge. Prior to that, ArcelorMittal announced a $250/ton surcharge on sheet products.
With spot prices for flat-rolled steel now hovering around $1,000/ton, ArcelorMittal’s surcharges will narrow the gap between the two price points, and bring the contract supplies closer to the profit levels being achieved on non-contract materials.
Other steelmakers have not matched the surcharges, though Nucor Steel increased its price on plate products earlier this month – and warned that further raises may follow based on raw materials costs. AK Steel has said it will not apply surcharges, but may avail itself of contract provisions that address raw materials costs.
The cost of steelmaking raw materials, in particular iron ore, has risen dramatically since the start of this year. Most of the world’s large integrated steelmakers have agreed to price increases ranging from 60% to 90% for iron-ore deliveries in the coming year. Energy prices are another factor of rising steel production costs.
Nippon Steel recently issued a warning on its earnings, saying raw materials costs may depress income by up to 41%. U.S. steelmakers, however, including Nucor and Steel Dynamics, expect to report significantly higher income in their next statements because of ongoing strong demand for steel.
With spot prices for flat-rolled steel now hovering around $1,000/ton, ArcelorMittal’s surcharges will narrow the gap between the two price points, and bring the contract supplies closer to the profit levels being achieved on non-contract materials.
Other steelmakers have not matched the surcharges, though Nucor Steel increased its price on plate products earlier this month – and warned that further raises may follow based on raw materials costs. AK Steel has said it will not apply surcharges, but may avail itself of contract provisions that address raw materials costs.
The cost of steelmaking raw materials, in particular iron ore, has risen dramatically since the start of this year. Most of the world’s large integrated steelmakers have agreed to price increases ranging from 60% to 90% for iron-ore deliveries in the coming year. Energy prices are another factor of rising steel production costs.
Nippon Steel recently issued a warning on its earnings, saying raw materials costs may depress income by up to 41%. U.S. steelmakers, however, including Nucor and Steel Dynamics, expect to report significantly higher income in their next statements because of ongoing strong demand for steel.
