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Steel market needs much greater transparency for price hikes to be accepted, says SBB - 14 April 2010

Cost increases which have hit the steel producers in recent months are set to continue their strong hold on the market in the coming months. With both the big three iron ore miners and steel producers continuing to refuse to divulge full details of the cost hikes, the mills were finding it relatively easy to persist in raising their offer prices for finished products.

Henry Cooke, Global Editor of SBB notes, however, that producers will be affected by the increased costs to differing degrees depending on the extent of their vertical integration. “Thus buyers from companies such as ThyssenKrupp, for example, may be hit more severely than those from ArcelorMittal, which outside Europe is more self sufficient in both coking coal and iron ore,” he says.

While finished asking prices continue to rise, it seems that the pace of announced increases may be slowing somewhat. It is likely to take some months for producers to achieve their price targets, and by then their cost situation will have changed if raw material prices are revised in the July to September quarter.

Though many buyers feel that the extent of the price hikes is unjustified, there has been little outright resistance among consumers. This may be as steel represents only a small element in the cost of most final products, and demand remains slow in many parts of the world.

However if the producers want distributors and end-users to accept this year’s steep price increases, they will need to become more open with the details of their raw materials contracts. “Transparency will be paramount in the long term,” says Cooke.

 

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