Expensive raw stuff to boost metal goods prices, MetalPress says

The media have been talking about some significant increase in metal goods prices since April 2008; Russia’s leading metallurgical enterprises raised their prices despite their customers’ strong dissatisfaction; pipe manufacturer and O&G companies (the pipe manufacturers’ end users), as well as the car and the building industries say more expensive metal will badly affect the country’s economic growth and could threaten economy with another inflation wave.

In the meantime, Russian rolled steel makers only follow global trends. ArcelorMittal, the world’s largest steelmaker, raised the price of a metric ton of steel by $126, or 20% in mid-May. The reason for this simultaneous price soaring all over the world is the same: dearer raw materials. This year, Chinese and Japanese metallurgical enterprises (the raw stuffs market’s indicators of sorts) have signed their contracts with their Brazilian and Australian suppliers at prices that were much higher than last year’s figures. According to these contracts, iron ore is now 70% more expensive than a year earlier, while baking coal price tripled and came to $300 per ton.

All this means that metal goods prices can hardly remain the same. A MetalPress analyst Valeriy Anufriev feels that even when a metallurgical enterprise is vertically integrated and has all the raw materials needed, it cannot avoid price increases.

At the same time, MMK could become less dependent on raw stuffs purchases, Anufriev says. Getting more from the company’s own mines in Magnitogorsk and Bakal and the prospective increase in ferriferous waste recycling could be two solutions to the problem that would cover 20% to 30% of MMK’s ore needs. Besides, the construction of Prioskolskiy ore mining and processing enterprise will make up for the rest of the necessary iron ore completely. Then, MMK could keep on integrating with Belon (40% of whose shares Magnitogorsk Iron & Steel Works currently owns) and thus cover its baking coal needs. Finally, MMK has got plenty of five- to ten-year contracts with a number of raw materials suppliers.


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