According to mining and steel analyst Mr Rafael Weber with Brazilian brokerage Geracao Futuro, steelmakers' quarterly results could start to be negatively impacted if further iron ore price hikes occur in H2. Through Q2, steelmakers have been able to pass on production cost increases in line with the adjustments announced for inputs such as iron ore and coal.
Mr Weber told BNamericas that "If there are iron ore price increases in the third quarter, based on price averages in Q2, of a further 20% to 30%, the concern is whether steelmakers will be able to pass on such new adjustments that will allow for continuation of favorable margins."
He pointed out that steelmakers will have to adjust their business structures to work with more volatility in raw material prices. He said that "Before, companies worked based on a one year price forecast but now it is only three months."
Mr Weber explained that during the economic turmoil, the benchmark system proved to be useless, which later motivated changes in prices negotiations worldwide. He said that "There will be more pressure from steelmakers in the short term, but the situation will normalize with some time."