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ArcelorMittal uses indices to price car contracts - 7 March 2012

The shift to shorter pricing periods for iron ore contracts means ArcelorMittal has begun using independent price indices to price its steel contracts, says Jean-Martin Van der Hoeven, chief marketing officer with ArcelorMittal Flat Carbon Europe. “It is not with pleasure,” but ArcelorMittal has also been forced to adopt shorter contracts with its automotive customers in Europe, he adds.

“This is a very unfortunate situation. [We are having] to cut the duration of our contracts or work with index prices," Van der Hoeven said at the Handelsblatt steel conference in Düsseldorf, Germany. As iron ore contracts moved to a year and less, European automotive contracts have gone from fixed terms of 3-5 years to one year and less, he confirms.

Shorter iron ore contracts and a more powerful raw materials sector are regrettable from the steelmakers' viewpoint, agrees Hans Jürgen Kerkhoff, president of Germany's steel federation WV Stahl. For this reason, the steelmakers' association welcomes Eurofer’s request to the EU Commission to investigate the proposed merger between the raw materials producer Xstrata and the world’s largest raw materials trader Glencore, he adds.

While the steel markets lost their price dynamism in recent years, the price of iron ore has more than tripled since the 2007 boom year, Kerkhoff stresses.

Kerkhoff ranked high and volatile raw material prices as one of the two greatest risks for Europe’s steelmakers. The other is the diverging economic fortunes in north and south Europe, with Italy and Spain causing particular concern, he told the conference, which was attended by Steel Business Briefing.

 

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