ArcelorMittal announces €100/t increase in European long steel prices - sources
ArcelorMittal is increasing the price of its commodity long steel products in Europe by at least €100 per tonne to compensate for soaring gas and electricity costs, Fastmarkets understands.
Market sources reported that the company has introduced price increases for steel beams, rebar and wire rod. The increases will apply to all new price agreements.
The move follows the introduction of energy surcharges on its European long steel products in October in a bid to mitigate soaring gas and electricity costs, which have since continued to rise.
Electricity prices have recently risen to €160-200 per megawatt-hour (MWh) from the normal rate of €55 per MWh. They had reached €250-400 per MWh at the time of the announced increases.
The forward prices range from €300-400 per MWh for the month ahead, while natural gas prices are currently €125 per MWh and are projected to remain at these high levels throughout the first quarter of 2022 - up from €20 per MWh.
As well as gas and electricity prices, carbon prices rose to €80-90 per tonne last week from €33 per tonne at the start of the year.
This was also in addition to higher prices for other materials such as ferro-alloys, lime and electrodes, all of which have increased significantly, as have logistics costs, which were up by as much as 25-40%.
Steel raw material costs are also at historic highs, including ferrous scrap, iron ore and coking coal.
These factors have driven up costs by €300-350 per tonne of steel, excluding logistics costs. The industry is concerned that futures rates indicate that these costs could go up even further.
Market sources told Fastmarkets that open offers for material have been withdrawn and new agreements will be subject to a €100 per tonne increase.
Mills across Europe have been reportedly cut production during peak energy periods, which have become more frequent.
The expected release of European funds for infrastructure spending should also boost steel demand in the short-to-medium term, in addition to eurozone manufacturing and construction PMI surveys showing clear signs of continued gains in recent months.
Industry sources do not expect an immediate relaxation of the situation until after the first quarter of 2022 at the earliest.
With much of the European market already finished or about to finish working ahead of the festival period, however, many market participants have already completed their purchasing in the seasonally slow month of December so no immediate impact on the market was reported. Still, sources said that some negotiations have already been concluded at the higher prices across commodity long steel.
Any impact is likely to show up when the market returns to negotiations in January, with producers keen to maintain momentum after the holiday.
Because of the seasonal slowdown, buyers have largely withdrawn from the market while producers are busy considering raising their prices.
Market participants largely believe the price increases that producers are aiming for are a realistic target for January because energy and gas costs are likely to continue to rise.
“The recent downward correction of scrap price in some countries is absolutely not enough to compensate for the unbelievable energy prices,” a buyer in Benelux region told Fastmarkets.
Fastmarkets’ weekly price assessment for steel reinforcing bar (rebar), domestic, delivered Northern Europe was unchanged at €810-840 per tonne on December 15.
And Fastmarkets’ weekly price assessment for steel wire rod (mesh quality), domestic, delivered Northern Europe was also unchanged €820-840 per tonne on December 15.
“I think we will see rebar and wire rod prices above €900 per tonne in January,” a buyer in Germany said.
“If buyers do not accept higher price, we will have to cut production more, and we are ready to do that,” a mill source in Southern Europe told Fastmarkets.
Some mills have already chosen to withdraw from the market completely until January to get a better overall picture.
“We remain in wait-and-see mode until January to understand what the real energy costs will be [then],” a mill source in Southern Europe told Fastmarkets.
“Electric-based steel mills should consider their strategy very carefully because energy costs in January will be very important. Any mistake could be very costly,” another producer said.
Fastmarkets most recent weekly price assessment for steel beams domestic, delivered Northern Europe was €1,020-1,040 per tonne on December 15, unchanged week on week and just below the historic highs reported during the summer.