Mittal predicts 21% jump in steel prices

 Source:Moneylife ,April 02, 2010 03:02 PM
ArcelorMittal’s CEO forecasts a drastic increase in prices for benchmark hot-rolled coil

Lakshmi Mittal, chief executive officer of ArcelorMittal, the world's biggest steelmaker, has stoked a row over how global prices are set by telling consumers that raw material costs may push steel rates up by 21%.

"The cost of producing steel is going to go up and will be passed on to customers," Mr Mittal said in an interview, reports PTI.

Benchmark European hot-rolled coil prices will rise by $150 a metric tonne in the second quarter, he said. Steelmakers are passing on costs after Vale SA, the largest iron-ore producer, scrapped a four-decade system of annual price-setting and boosted prices for Japanese steelmakers as much as 90%.
Carmakers, the biggest users of steel, are crying foul.

The European Automobile Manufacturers' Association, which represents companies, including Volkswagen AG, PSA Peugeot Citroen and Fiat SpA, said that members want EU regulators to “tackle distortive developments” caused by the changes from mining companies.

“The necessity to increase prices is generating the ire of customers and a bitter battle is raging,” said Christian Georges, an analyst at Olivetree Securities who has tracked industry and resources for 15 years.
Mr Mittal's forecast for benchmark hot-rolled coil would mark a 21% jump from levels now of about $700 a tonne, based on Metal Bulletin data. The coiled steel is used by firms from Toyota Motor Corp, the world’s biggest carmaker, to Royal Philips Electronics NV, the largest lighting company.

Eurofer, a group representing steelmakers in Europe, accused the biggest iron ore suppliers of “illicit coordination of prices” and said it had notified the regulatory arm of the European Commission about possible anti-competitive practices. It said that a shift to shorter contracts for iron ore at higher rates may boost costs for their customers by as much as a third.

“Steel producers will have to pass these rises on to the consumers,” Eurofer director-general Gordon Moffat said in a phone interview. “It's going to create a great deal more volatility in prices.”