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Steel price may rise by 50% due to high production costs

The average price of steel products in the international market may increase by about 50 percent to US$900 per ton in June from $600 in January due to higher production costs

Nani Afrida (The Jakarta Post)
Jakarta
Thu, April 8, 2010

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Steel price may rise by 50% due to high production costs

T

he average price of steel products in the international market may increase by about 50 percent to US$900 per ton in June from $600 in January due to higher production costs.

Irvan Kamil, the marketing director of state steel company PT Krakatau Steel said that steel producers had no choice but to pass the higher production costs on to consumers to cope with the sharp increase in the prices of raw materials.

According to him, the price of raw materials had increased by about 90 percent during the past several months although demand is still relatively stable.

“The price of steel products rose to $700 per ton in March from about $600 in January. It is expected to further increase to $900 per ton in June,” he told reporters.

Although the steel market is quite promising, Krakatau Steel does not have any plan to increase its production target.

“To produce with full capacity, we need at least 137 mmcfd [million standard cubic feet per day of
gas supply.

“At the present we just have 87 mmcfd,” Irvan said, adding that to get additional gas supply of 50 mmcfd would be quite difficult right now.

At present, the steel company receives gas supply from state oil and gas producer PT Pertamina and  state gas distributor PGN.

Krakatau Steel now aims to increase its production to about 2.8 million tons of steel products this year from last year’s 2.4 million tons to meet rising domestic demand which is expected to rise by
12 percent.

Until March, Krakatau has produced 600,000 tons of steel products.

It was reported that Indonesia produced 4.5 million tons of steel last year.

Krakatau expects to book a 29 percent increase in its total sales this year rising to Rp 21 trillion (US$2.2 billion).

Its sales dropped to about Rp 16 trillion due to the global economic slowdown last year.

The company sold about 2.11 million tons of steel in 2009, slightly lower than the 2.21 million tons the previous year.

The company estimated that net profit reached about Rp 491 billion, an increase of nearly 7 percent from Rp 460 billion in 2008.

Krakatau Steel’s total assets were estimated at Rp 12.64 trillion in 2009, down from Rp 15.37 trillion
in 2008.

Lakshmi Mittal, chief executive officer of the world’s largest steel maker ArcelorMittal, earlier estimated that the benchmark hot-rolled coil price would increase by $150 per ton in the second quarter from about $700 per ton

“The cost of producing steel is going up and will be passed on to customers,” Mittal told Bloomberg on April 1.

Eurofer, a group representing steelmakers in Europe, accused major iron ore suppliers of “illicit coordination of prices.

The organization had said that it had notified the European Commission about possible anti-competitive pricing practices.

 

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