core sector communique

The steel industry repeats alarm over recent developments in raw materials markets.

Brussels, 7 May 2010 - At today’s meeting of the intergovernmental OECD Steel Committee held in Paris, Ian Christmas, Director General, of the World Steel Association (worldsteel) reiterated the industry’s alarm at the potential negative impact on steel and its customers from recent developments in the market for iron ore and metallurgical coal.

 

In his statement Ian Christmas said, “Steel is a capital intensive and globally critical industry which has a big impact on the economy. It requires long-term relationships between mining companies, steel companies and the users of steel, and recognition of their mutual dependence. The current developments in the raw materials market constitute a breakdown in this relationship and it is in the long-term interests of the complete steel supply chain that this is rebuilt”.

 

Continuing he said, “Our industry has three major concerns: Firstly, the recent unprecedented rises in the price of iron ore and metallurgical coal pose serious problems for the margins of steel companies and their customers and risks accelerating inflationary pressures in the economies of many countries since steel is used in virtually every aspect of modern life. It also has a serious knock-on effect on the market for ferrous scrap.

 

Secondly, the unilateral replacement of annual contracts by a three-month spot price for iron ore by the major mining companies will greatly increase the risk of price volatility in iron ore and scrap prices which will have a negative impact on the whole steel supply chain”.

 

Finally, he concluded, “In light of the already highly concentrated nature of the iron ore industry, where only three companies (Vale, Rio Tinto and BHP Billiton) control most of supplies, there is a clear case for the competition authorities around the world to oppose any further consolidation of business interests between the top three mining companies. Competition authorities may also wish to consider whether the current market concentration is in the interest of the users of steel and society as a whole.”