The price of steel-making raw materials such as iron ore, coal and scrap metal will continue to rise for several years, keeping pressure on manufacturers and consumers, the head of U.S. steel maker Nucor Corp. said Wednesday.
“The bull market for commodities will last for decades to come, and our customers need to get used to it,” Dan DiMicco, the company's chairman, president and chief executive officer, told a steel conference.
“Iron ore is up several hundred per cent, scrap prices are $600 (U.S.) to $700 per ton, pig iron is $900 per ton, and coal is rising several hundred per cent even as we speak,” Mr. DiMicco said.
“I believe raw materials, including scrap, will continue to see escalation in prices,” he said.
His comments, at the American Metal Market's Steel Success Strategies conference, echoed those of U.S. Steel Corp.'s chief executive officer John Surma on Tuesday.
Mr. Surma told Reuters that spiralling iron ore costs were pushing steel prices even higher and he warned that growing demand is straining miners' capacity to supply raw materials.
On Monday, China's Baosteel agreed to a 96.5 per cent price hike for iron ore from Rio Tinto PLC, and last month Brazilian ore producers won 65 per cent price increases. Iron ore is a key ingredient in steel making.
Steel prices have soared almost 50 per cent this year, as raw material costs continue to climb and global demand shows little sign of abating.
SOARING SCRAP
Nucor makes its steel mostly from scrap metal, which is selling for more than double what it did last year and 70 per cent more than three months ago.
Scrap is the major feedstock for electric arc furnaces operated by mini-mill steel makers like Nucor, while integrated steel producers such as U.S. Steel make their products in blast furnaces which use coking coal to melt iron ore.
Nucor has moved recently to secure supplies. The Charlotte, North Carolina-based company is the largest purchaser of ferrous scrap in North America with total scrap purchases of 22.8 million tons in 2007.
Earlier this year it paid $1.44-billion for scrap processor David J. Joseph Co. and recently acquired the assets of Galamba Metals Group, which operates 16 scrap-processing facilities in Kansas, Missouri and Arkansas, and Metal Recycling Services Inc., based in Monroe, North Carolina.
In his address, Mr. DiMicco gave an upbeat forecast for steel, citing “favourable industry dynamics” driven by global demand, especially from China, India and other emerging economies.
He compared the current climate to that of the late 1940s and early '50s, when the industry was being rebuilt after the destruction of World War II.
“But today is different in that we are building an infrastructure that didn't exist before,” he said.
“Consumption growth is rocketing to 5 to 7 per cent per year and it is being driven by a demographic of 2 to 3 billion people in a world that wants a better standard of living,” he said.
