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Steelmaker boosts prices, cites energy, iron ore costs

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Thursday, April 17, 2008
 

A recent surge in steel prices continued Wednesday with ArcelorMittal saying it will increase prices by $250 a ton on some steel shipments -- a move that will benefit steel companies such as U.S. Steel Corp., analysts said.

Strong global demand has increased prices for hot-rolled coiled steel from $529 a ton in October to $845 a ton this month, according to the Steel Index, a London-based research firm. U.S. prices for flat-rolled steel jumped to $740 a ton in March from $655 per ton in February, according to Purchase magazine.

"This market has gone crazy. You'll probably see $1,000-a-ton steel by June," said steel industry analyst Charles Bradford of Bradford/Soleil Securities of New York.

Steel stocks are surging as well. Pittsburgh-based U.S. Steel's shares rose 6.1 percent yesterday to close at $155.58 a share, up $8.95. The closing topped the stock's previous 52-week high of $148.08.

AK Steel shares rose $2.35 a share to $68.50, a 3.6 percent increase. The closing topped its previous 52-week high of $67.75. And Allegheny Technologies Inc., the Downtown-based specialty metals and titanium maker, had its shares rise to $78.44, up $3.95, or 5.3 percent.

ArcelorMittal of Luxembourg said the 33 percent increase is necessary to recoup the rising costs of energy and iron ore, which are key ingredients for steelmaking. The price increase would be slapped on orders of flat-rolled steel for shipment May 5.

U.S. Steel's prices "will be in line" with what is occurring in the steel market, Chief Operating Officer John H. Goodish said yesterday after a speech before the Economic Club of Pittsburgh at the Omni William Penn, Downtown. Goodish did not hint at whether U.S. Steel would follow ArcelorMittlal in increasing some of its prices.

U.S. Steel probably will bump up the cost of its spot steel, Bradford said. About one-half of the company's domestic steel sales is under contract with the auto industry, Bradford said. General Motors Corp., he noted, previously had sued a steelmaker that sought to raise prices on contracted steel orders.

ArcelorMittal is trying to take advantage of strong global demand to pass along higher costs for iron ore as well as higher energy prices and shipping costs.

U.S. Steel appears to be in good position to benefit from the higher raw material prices.

"The advantage U.S. Steel has is they own their own iron ore (reserves), have their coke operations and bought coal (baked to produce coke) under contract," Bradford said.

U.S. Steel has iron ore reserves in northern Minnesota, and has coke-producing operations at its Clairton Works; its Gary, Ind., plant; and Granite City plant near St. Louis.

Goodish said all the steelmakers have some cost advantages and some cost disadvantages. While U.S. Steel makes most of its own coke, it does have to buy some from other producers, he said.

AK Steel Corp. of Middletown, Ohio, which has a plant in Butler, previously boosted its spot prices for its carbon steel products by $50 per ton for orders in February. That came on top of an earlier $30-per-ton price increase, which also was to take effect in February. The price increase was blamed on an increased demand for carbon steel products, as well as the need to recover higher costs for production.

 

 
 


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