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Steel price surge in sight


Published: - 10/10/2021 Author: Dell'Oro, Management
Steel price surge in sight

Have you double-checked your last bill? Electricity costs are through the roof. The increase in raw materials and the record high prices of carbon emission allowances have caused tariffs to skyrocket, much to the detriment of families and companies alike. 

Among the hardest-hit sectors is the steel industry, which has always been heavily dependent on electricity costs. In a recent article, CRU provides a detailed analysis of the situation in Europe, taking into consideration the various countries of origin and steelmaking technologies. In particular, EAF-based steel mills (in Europe mainly suppliers of long products) have been affected harder by price increases than BF-BOF producers (mostly specializing in sheet products). Italy and the UK are currently the countries suffering the most, as energy prices are generally speaking already higher than average and also more exposed to fluctuations in gas costs than other countries such as Germany, where coal is the primary source of supply. In some cases, steel mills even face intraday tariffs that push costs to more than double the price of steel. These producers have no choice but to shut down their plants.

Several European steel giants are already running for cover: ArcelorMittal is implementing a €50/ton surcharge on long products to offset rising energy and raw material prices. As Argus Media reports, electricity and natural gas cost increases have added €120/t to the cost of steel production, while suppliers of ferro-alloys and limestone are also asking for surcharges. Other long producers, such as Celsa, have also tried to impose surcharges in recent days. In the UK, Liberty Steel seems ready to follow Arcelor Mittal's example by raising prices on specialty steels.

The industry is experiencing a strong post-pandemic recovery, but this rise in tariffs is becoming unsustainable and risks compromising Europe’s growth. Against this backdrop, the idea of a European energy market, a concept that has been on the table for a quite some time, has come back to life. In some EU countries, especially in the north, a megawatt of electricity costs half as much than - let’s say - Italy; a situation that sets the stage for inequalities and opens the way to unfair competition.

Photo by Gregor Schlaeger



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