05/04/2010
Change in the «Raw pricing» threatens to raise the steel products prices globally 30%
Steel prices expected to rise during the coming period as a result of steel pricing change
Steel prices are expected to see a big rise up to third in the next period, after the agreement between mining companies and steel manufacturers last Tuesday to change the iron ore pricing, which is considered one of the most important developments in the history of this industry, which will impact on the cost of goods traded between people every day from cars to household equipments.
The deal signed between the Brazilian Company "Vale" and BHP Billiton Co. (A British – Australian Partnership) considered a milestone which has put an end to the records system for the annual contracts that was applied 40 years ago, and put an end to negotiations lasted so long.
Below are more details:
Steel prices are expected to see a big rise up to third in the next period, after the agreement between mining companies and steel manufacturers last Tuesday to change the iron ore pricing, which is considered one of the most important developments in the history of this industry, which will impact on the cost of goods traded between people every day from cars to household equipments.
The deal signed between the Brazilian Company "Vale" and BHP Billiton Co. (A British – Australian Partnership) considered a milestone which has put an end to the records system for the annual contracts that was applied 40 years ago, and put an end to negotiations lasted so long.
The price new system may lead to a high cost of iron ore according to the steel Asian companies to rise up to 110 dollars to 120 dollars per ton from April to June, an increase of 80 to 100 per cent the level of the 60 U.S. dollars per ton, a price that was agreed upon in the annual contracts for the period from 2009 to 2010. It is worth mentioning here that the manufacturing processes used in the region, especially in Saudi, Egypt and Qatar, which technology uses the direct reduction, based on the quality of iron ore value-added and higher cost, since the cost of this crude oil increase by range between 80 and 85 dollars per ton on the cost above.
It is expected that mining companies will have huge profits in iron ore in the short- term due to the new pricing system.
Rolled-Steel standard cost is likely to reach 725 to 750 dollars per ton at the end of next quarter, up from 550 dollars per ton in January, Thorsten Zimmerman, A Steel analyast with of HSBC in London pointed out that «the rise in prices of raw materials will be charged to the consumer».
The executives in the industry have said that the largest Japanese steel companies including the «Nippon Steel», and China steel companies, including the «Baosteel» Baosteel, has signed contracts new quarterly, but the European steel companies have not yet signed any contracts quarterly new. Although Rio Tinto has not announced the signing of new contracts, but executives at the company said it will do so soon.
Analysts have said the steel new pricing system is likely to rise even more than before during the summer.
In the same context, Posco "The Korean fourth-largest steelmaker in the world" last Friday, have become the last company in this area to agree to buy iron ore contracts quarterly, along with the mining companies this week to persuade more customers in China and Japan to give up on the mechanism of annual to determine prices established 40 years ago in favor of shorter-term agreements on the market.
Above all, the industry which represents steel makers pointed out in a statement on Thursday ,have requested the responsible authorities around the world to study the iron ore market to see if there were signs of abusing the market dominance by large mining companies .
The World Steel Association noted the current pricing system based on annual contracts have supported the long-term relations between the steel industry and iron ore suppliers, as well as leading to investment decisions useful in the medium term. Ian Christmas, "General Director of the World Steel Association has said« The decision contained in the Convention to turn the instant prices will fluctuate, and will not benefit any of the parties in the medium - long term ». Also «The ability of mining companies to dictate this change, which maximizes profits in the short term comes due to the lack of competition in the market for iron ore transported by sea». The union pointed out that FELL and Rio companies, BHP Billiton controlled 68.5 per cent of the market of iron ore transported by sea.
