ArcelorMittal to Pass On Rising Raw Material Prices

Worker in an Alcoa plant.
AP
Worker in an Alcoa plant.

Rising raw material prices are likely to be passed on and will take another chunk out of consumers’ wallets, further heaping inflationary pressures on to the global economy, ArcelorMittal CFO Aditya Mittal told CNBC Wednesday.

“In 2008 we have seen significant raw material price increases, this is impacting not only the global steel industry, but will eventually impact the average consumer because we will see this higher cost increases in the cars we buy, in the appliances we buy and in the homes we build,” Mittal told “Worldwide Exchange.”

The soaring cost of iron ore, the main material in making steel, has been forcing metal makers such as ArcelorMittal to look at passing the higher input prices onto their customers.

ArcelorMittal has managed to keeps some of the price rises at bay so far due to having 45 percent self-sufficiency for iron-ore production, but the company is currently renegotiating key contracts in an attempt to recoup some of the added costs and has hiked the price for its flat carbon products in Europe.

The steel maker reported solid earnings Wednesday, ahead of its own forecasts, and said the weakness in the US economy was not affecting its performance because of the strong demand from industrializing countries such as Russia, China and India.

But its ability to successfully pass on the rising cost of steel production could be the key issue for the company and the industry as a whole, as fears of an economic slowdown in the US and Europe mount.

“The big issue facing the steel industry is the higher raw material coasts … clearly we are getting squeezed,” Mittal said.