ArcelorMittal is telling its European clients in the long products segment that it is implementing a €50/tonne ($58) surcharge on new contracts due to surging energy costs, Kallanish learns from market sources.

The company is understood to be informing customers that it can no longer bear the increased energy costs alone. The steelmaker has been hit by the rally in both electricity and natural gas prices in recent weeks, which have added over €120/t to production cost, according to sources. Electricity prices are up to €160-200/Mwh from the usual €55/Mwh, while gas is at €100/Mwh versus €20/Mwh.

In addition to energy prices, European carbon emissions allowances have also reached new record-high prices of €64/t, severely impacting production costs for steelmakers across the continent. Moreover, ArcelorMittal’s ferroalloy suppliers have also levied surcharges of their own. The new energy surcharge is expected to remain in place until energy prices return to "normal levels", ArcelorMittal tells customers.

While the surcharge will effectively raise ArcelorMittal’s longs prices, it is not a price increase per se. The market is still assessing the latest scrap price volatility to understand if the recent longs pricing downtrend has already reached its end.