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Higher steel cost
End of March 2010 Global miners and key Asian steelmakers have agreed to a big increase in iron ore prices after they signed deals to replace the 40-year-old pricing system based on annual contracts with new short-term (quarterly) deals linked to market-based prices.
Iron ore is the main ingredient used to make steel. The new agreements mean that steelmakers will pay around $110-$120 a tonne next quarter for their iron ore, a 90-100 per cent increase from the $60 level at which the 2009-10 annual contracts were settled, industry executives said. Prices are likely to rise further later on the year.
Higher prices for our raw material (cold rolled steel)
Coil prices are expected to continue rising until at least this summer. Those prices have already risen by about 150€/ton since the beginning of 2010. In addition to iron ore prices increases, coking coal cost increases of around 55% and scrap prices continues to rise in many parts of the world.
On top of this raw material (for steel) situation, availability of cold rolled steel remains tight with capacity utilization at European mills running at 70-80%.