JOHANNESBURG (Business Day) -- Another 5% hike in steel prices is on the cards for next month, bringing total steel price increases for the year to date to a whopping 65%. The unprecedented rises will further fuel inflation and put the squeeze on consumers.
ArcelorMittal SA [NYSE:MT] said last week that the price of flat steel products is set to rise by about 5% - the fifth increase this year - in line with rising international prices, soaring input costs and a weaker exchange rate. The price of long steel products will remain unchanged.
The latest increase will bring the average cost of flat steel to $950 a tonne, but this was still low compared with international steel prices, Mittal spokesman Tami Didiza said. Steel in Asia cost about $970 a tonne, in Europe a tonne fetched just more than $1000 and in America it cost $1080 a tonne, he said.
The benchmark price for western Europe hot-rolled coil had gained about 32% this year to $930 a tonne by the end of March, according to Metal Bulletin data as quoted by Bloomberg.
Mittal will increase steel prices by 20%-22% this month, following price increases of between 9% and 18% every month since the beginning of the year.
The price increases were spurred by rising raw material costs.
Mittal has a big advantage over other steel producers because it pays cost plus 3% for iron ore, the biggest input into steel production, in terms of an evergreen agreement with Kumba Iron Ore [JSE:KIO]. But Didiza said Mittal took this into account in the calculation of price increases.
Since the Competition Tribunal ruled against the steel giant in an excessive-pricing case last year, Mittal's price increases have consistently been met by outrage.
Mittal, which insists it has departed from the notorious import parity pricing model and has adopted a pricing model in which it compares its own prices with a basket of prices in comparable markets internationally, said even with the string of price increases, its steel was among the cheapest in a basket of prices.
The basket includes Korea, Germany, China, Russia, Taiwan, Brazil and the U.S., but also takes into account the direction of market movements and exchange rate volatility.
