host posted on March 09, 2010 04:11
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| In light of the unfortunate crisis between ArcelorMittal SA & Kumba Iron Ore (KIO) regarding the termination of its (KIO) iron-ore supply agreement with ArecelorMittal, the future of steel prices is very uncertain. Analysts have told Reuters that this could add about $250-million a year to ArcelorMittal South Africa's cost structure. We believe that this cost is far too much for the company to absorb itself and it is very likely that they will pass the cost onto the consumer. Similarly Starpak cannot be expected to carry the cost either as our margins will not allow this. It’s difficult at this stage to determine what the increase might be, but for us it’s imperative to inform you as our customers of this impending eventuality and the effects it might have on our process. What this means is that any orders placed after this press has gone public might be affected by the increase and all previous quotes will have to be evaluated based on the current situation. |
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| In light of the unfortunate crisis between ArcelorMittal SA & Kumba Iron Ore (KIO) regarding the termination of its (KIO) iron-ore supply agreement with ArecelorMittal, the future of steel prices is very uncertain. Analysts have told Reuters that this could add about $250-million a year to ArcelorMittal South Africa's cost structure. We believe that this cost is far too much for the company to absorb itself and it is very likely that they will pass the cost onto the consumer. Similarly Starpak cannot be expected to carry the cost either as our margins will not allow this. It’s difficult at this stage to determine what the increase might be, but for us it’s imperative to inform you, as our customers of this impending eventuality and the effects it can have on our process. What this means is that any orders placed after this press release has gone public, might be affected by the increase and all previous quotes will have to be evaluated based on the current situation. |
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| For all orders that have been placed in the last two weeks, we strongly advise that you pay your deposit without delay so that we can try to secure the steel at the current price. We cannot however guarantee that this will be the case as the market is very unpredictable. Please note that failure to secure today’s prices will ultimately mean that we will have to increase the price of the order based on the steel price increase. We draw your attention to an article on polity.org.za, a website operated and maintained by Creamer Media: |
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| “Meanwhile, ArcelorMittal South Africa spokesperson Marion Green-Thompson told Engineering News Online that the group was in possession of "normal inventory levels" of two months, but that these did not represent a stockpile. "The company has approximately two months of inventories at the plant and we have additional supplies that have been paid for, still to be despatched from Thabazimbi," Green-Thompson explained, adding that this would add a further 800 000 t to its iron-ore position.” She also confirmed that steel prices would be left unchanged during March.” Polity.org.za 1 March 2010 |
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| The full article can be found at http://www.polity.org.za/article/kumba-outlines-why-arcelormittal-sa-should-pay-commercial-ore-prices-2010-03-01-2 |
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| A secondary potential problem we could face is the effect this could have on our lead-times. We envisage a flood of steel purchases before the increase takes place which could see suppliers running out of stock rather quickly. Please be aware that this might affect the promised delivery dates. We will certainly do our best to avoid this and will keep you informed at all times. |
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| The situation is indeed unfortunate but it is important that we are prepared for such an eventuality. We welcome any feedback and will address any concerns you might have. All concerns can be addressed to wsmith@starpak.co.za |
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