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ArcelorMittal hit by rising input costs; imposes Euro 50 surcharge

ArcelorMittal, the world’s leading steel and mining company, hedged in by rising input costs, is imposing a surcharge of Euro 50 per tonne of steel, to be applied o...

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8 Oct 2021, 21:33 IST
ArcelorMittal hit by rising input costs; imposes Euro 50 surcharge

ArcelorMittal, the world's leading steel and mining company, hedged in by rising input costs, is imposing a surcharge of Euro 50 per tonne of steel, to be applied on all new price agreements.

Why is the surcharge being implemented?

  • Amit Sengupa, chief marketing officer, ArcelorMittal Europe Long Products, though a release said that developments affecting the steel industry in Europe, including AcelorMittal, are having a significant cost impact on the steel business. For instance:

  • Energy prices, both gas and electricity, have increased exponentially to reach record levels across Europe. During the whole of September, electricity and natural gas prices remained at record levels. Currently, electricity prices are in the range of Euro 160-200 megawatt per hour (MWh) compared to the usual euro 55/MWh.

  • Natural gas prices are more than Euro 100 per MWh compared to the normal rate of around Euro 20/MWh.

  • Elevated electricity and natural gas prices are increasing costs by more than Euro 120/tonne (t) of steel. "What is worse is that the futures in these commodities indicate that prices will go up even further," Sengupta said.

  • Ferro alloy and limestone suppliers are seeking surcharges, although the company did not mention the amount. "Suppliers of ferro alloys - which are very energy-intensive - and limestone are asking for surcharges. The impact will also be significant and is currently being evaluated," Sengupta further said.

  • Carbon (coking coal and met coke) prices alone contribute to Euro 62/ t higher costs, having risen from Euro 33/ t at the beginning of the year to Euro 64/t currently.

"Considering the magnitude of these increases, it is no longer possible for ArcelorMittal to continue to absorb these costs alone. Under these circumstances, we are left with no option but to recoup at least a part of these costs via a surcharge of EUR50 per metric tonne to be applied to all new price agreements," Sengupta said.

ArcelorMittal's hot rolled coil (HRC) prices in Europe, after touching a peak of Euro 1,200/t on 24 Jun'21 since Apr'21, dropped off to Euro 1,150/t on 13 Sept'21, as per SteelMint data. The company's cold roll coil (CRC) prices hit a peak of Euro 1,350/t and then dipped to Euro 1,250/t on these dates respectively.

Way ahead

However, the company said this surcharge "will be withdrawn as soon as energy prices come back to the normal levels".

 

8 Oct 2021, 21:33 IST

 

 

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