210 percent increase in coking coal prices

BHP mate...BHP ! :))

Another steel price hike on the cards

April 4, 2008



Johannesburg - The price of coking coal, a key ingredient in steel making, was expected to rise by 150 percent to 200 percent, driving up steel prices further, the world's largest steel maker, ArcelorMittal, said yesterday.

ArcelorMittal has a 52 percent stake in ArcelorMittal South Africa.

Reuters reported that BHP Billiton was looking for a 210 percent increase in coking coal prices to $300 (R2 300) a ton. Should this happen, local steel consumers face the prospect of a fifth increase in domestic steel prices this year.

By the beginning of next month, ArcelorMittal SA's hot rolled coil steel would have increased by about 60 percent since January.

Last year, 56 percent of ArcelorMittal SA's operating costs were made up by raw materials and consumables, including coking coal.

Doret Els, an Efficient Group economist, said the combination of increasing commodity prices such as steel and oil, as well as a weaker rand combined with higher interest rates, would limit the production capacity of local companies.

Other difficulties local companies face are shortages of power as well as the call by Eskom for a more than 60 percent increase in power tariffs.

Els said the profitability of local companies would also be placed under pressure.

Peter Fish, an analyst for UK-based steel consultancy MEPS, said an increase in the coking coal price of the order of 200 percent would push steel prices higher.

Anwaar Wagner, a resources analyst with Old Mutual Investment Group South Africa, said "a substantial increase" in coking coal prices was on the cards and for steel makers to maintain their profit margins they would have to respond with a price increase.

Tami Didiza, ArcelorMittal SA spokesperson, declined to comment on the outlook for local steel prices.

Importing metallurgic coking coal is one of ArcelorMittal's biggest costs.

Last year the company imported 64 percent of its coking coal requirement.

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