Steel oligarchs

For those visitors who may be interested in the steel industry in Russia and Ukraine, the analyst team at www.steelonthenet.com has just put together a list of key oligarchs involved in CIS metals and mining. The listing also identifies the main steel industry businesses (plus other related metal sector assets) owned or largely controlled by the CIS billionaires.

To see the steel oligarch list, visit http://www.steelonthenet.com/files/oligarchs.html.

blogger@steelonthenet.com

Strategy and plant closures - Corus tinplate

This week saw an announcement from Corus concerning the possible reduction of capacity in Wales with the loss of up to 300 jobs at the steelmaker's tinplate operation in Llanelli [see http://icwales.icnetwork.co.uk/news/wales-news/2008/04/18/corus-to-lose-300-jobs-at-trostre-llanelli-91466-20784231/]. The planned reduction in capacity and headcount at Trostre it seems, is in response to overcapacity in global demand for tinplate.

The team at http://www.steelonthenet.com/ have for some time considered that - with no iron ore, a dependence on imported coal, high energy costs and expensive labour - there was little chance that UK iron and steelmaking would survive long-term. This view was reinforced by recent EU legislation concerning CO2 emissions, which can only result in further shifts of steelmaking from Western Europe to countries such as Brazil, Russia, India and China.

However, we always beleived that the future of UK steelmaking was in downstream steel products, where know-how, high value added, closeness to markets etc offset some of the economic disadvantages of making steel in the UK. The acquisition of Corus by Tata was, we also thought, a confirmation of our belief in the future of the UK steel sector downstream.

So this week's announcement about closure of downstream capacity at Corus comes as a bit of a surprise. With contraction of tinplate markets, and progressive relocation of automotive production and white goods manufacture to Central and Eastern Europe, it raises the question: what actually will Corus' new owners be left with in the UK, ten years down the line?

All clarifications / readers' comments concerning the strategic options for UK steelmaking welcomed!

blogger@steelonthenet.com

Coking coal prices 2008

Press reports are circulating (and quoting ArcelorMittal) about expected increases in coking coal prices of some 150-200%. This would add to the 65% increase in iron ore costs seen in January 2008, and to last month's near $100/tonne increase in scrap prices. Current coking coal prices are just under $100 per short ton [see http://www.steelonthenet.com/commodity_prices.html] and today make up around $65 of the total cost of a (metric) tonne of liquid steel through the integrated steelmaking route [see http://www.steelonthenet.com/steel_cost_bof.html].

For original report on the expected coking coal price increases see
http://www.fin24.com/articles/default/display_article.aspx?Nav=ns&ArticleID=1518-24_2299142.

blogger@steelonthenet.com

Steelmaking costs 2008

With all the talk of the impending 2008 iron ore price increase, industry observers might be forgiven for taking their eye off other steelmaking costs. But ferrous scrap prices also rocketed in January [see http://www.steelonthenet.com/commodity_prices.html], rising a massive $90/tonne to ~$385-$400 fob Rotterdam for HMS1. Just to add to the misery, natural gas prices also jumped 20% in January [http://www.steelonthenet.com/commodity_prices.html], to reach record levels ...

Anyone betting on a 2008 steel price fall ?

blogger@steelonthenet.com

2008 iron ore price rise

Reports are coming in that Nippon Steel has just agreed an iron ore price increase, effective 1st April 2008. The price rise is 65%.

Steel mills typically accept whatever price is first settled with one of the big three miners, so it seems probable that the 65% iron ore price increase will be the benchmark settlement for other deals in the coming weeks.

For original report, see http://uk.reuters.com/article/oilRpt/idUKL176439220080217

blogger@steelonthenet.com

Crude steel production 2007

According to the International Iron and Steel Institute, the top steel producing countries in 2007 were China (489 mt crude steel), Japan (120.2 mt), and the USA (97.2 mt).  World crude steel production reached 1,343.5 million metric tonnes, up 7.5% on 2007 with Chinese production growing almost 16% from 433 mt.

For full 2007 world steel production report, see http://www.worldsteel.org/?action=newsdetail&id=228

blogger@steelonthenet.com

2008 steelmaking costs rise steeply

As discussions centre on crude oil prices hitting $100 a barrel this week, steel portal www.steelonthenet.com has recalculated current steelmaking costs with the latest inputs prices for scrap, electricity, coal etc.

Even before the expected 2008 price increase for iron ore, steelmaking costs for a typical West European steelmaker have risen some 35-40% in the 12 months since January 2007. Electric arc furnace steelmaking currently costs approx $447 per tonne of liquid steel. BOF steelmaking currently costs $353 per tonne. The figures compare to costs of $321 and $262 respectively exactly one year ago.

The summary cost calculations behind the current figures are shown online at www.steelonthenet.com/steel_cost_eaf.html and www.steelonthenet.com/steel_cost_bof.html. Interestingly, the cost differential between BOF and electric steelmaking has swung towards integrated steelmaking, which is now $94/tonne cheaper [at liquid steel level] than scrap-based steelmaking.

It remains to be seen how this differential will be affected by the current round of negotiations about 2008 iron ore prices. The expected iron ore price rises seem very likely to push mid-2008 BOF steelmaking costs towards $400/tonne liquid steel, and EAF steelmaking towards $500/t meaning that these costs will more than 50% above end-2006 price levels.

It certainly seems like a good time to be selling scrap ...

blogger@steelonthenet.com

Steel glossary

Steelonthenet.com have published a glossary of terms. If you would like to know what a 'cobble' is, or need 'residuals' explained, please visit http://www.steelonthenet.com/glossary.html

Regards

blogger@steelonthenet.com

World crude steel output forecast

MEPS have just published a medium term world crude steel production forecast. Please see table below. This shows year 2011 crude steel production at ~1.6 billion tonnes, which is some 28% up on 2006 world output. China alone accounts for 208 mt of this increase. The implication is that Chinese crude steel capacity is coming onstream at a rate close to one million tonnes a week ... Wow !

Crude Steel Production Forecast (millions tonnes)
Region	2006	2007	2011
W. Europe	235.1	242.3	263.0
Former USSR	119.8	125.3	153.0
NAFTA	131.5	133.3	135.5
South America	45.3	47.5	61.5
Africa/Middle East	34.0	34.9	49.0
China	422.1	492.5	630.0
Japan	116.2	119.7	122.0
Rest of Asia	136.3	145.8	177.0
Oceania	8.7	8.8	9.0
World	1249.2	1350.0	1600.0
Source: MEPS - Global Iron & Steel Production to 2011

For original MEPS report, visit http://www.meps.co.uk/global-production2011.htm

blogger@steelonthenet.com

Top producer rankings in iron ore and steel

We have just published the top producer rankings in the steel sector, based on capacity as at the end of 2007.

In iron ore, CVRD leads the field with 324 mt of iron ore capacity (20% of the world total), and Rio Tinto second (209 mt) and BHP Billiton third (152 mt). BHP Billiton and Rio Tinto combined would therefore take the number one slot with ~360 mt, or approximately 22% of world supply. Currently, the top three have a worldwide supply share of 42%.

In steel flat products, Mittal Arcelor is in number one position with ~103 mt of flat roll capacity, US Steel is a fairly distant number two with ~32 mt flat product capacity and Nippon Steel is in number three slot with ~30 mt/year of capacity. The top three flat product producers currently have a world supply share of 26.5%.

In steel long products, Mittal Arcelor is again number one, but with just 8% or so of world supply (~ 47 mt capacity / year from a world total of about 596 mt). Gerdau of Brazil is number two (with approx 20 mt capacity) and Evrazholding of Russia is number three with ~15 mt/year of long product capacity. The top three long product producers together control just 14% or so of world supply.

Compared to iron ore production or flat steel product supply, the industry structure in steel long products therefore remains very fragmented. Perhaps long products is the next area where significant industry consolidation might therefore be expected in 2008 ?

For full top 20 capacity rankings in iron ore, flat and long products, visit us at http://www.steelonthenet.com/plant.html.

blogger@steelonthenet.com