Sunday, December 31, 2006

Steel price forecast 2007-2008

As we reach the end of 2006, the consultants at thought it might be of interest to share our thoughts about world steel price evolution in 2007 and beyond.

The chart below summarises our thoughts. It shows historic world steel prices [indexed to Jan 2000 = 100] and the cost of most steelmaking input costs for the last twelve years, plus our price forecasts (circled).

steel prices

The forecast is based on a mathematic analysis of the relationship between historic steel prices and each of the steelmaking cost inputs shown. Perhaps surprisingly, this analysis identifies only a weak (and insignificant) statistical relationship between steel prices and iron ore costs. A much stronger (and statistically significant) correlation proves evident between steel prices and (i) ferrous scrap and (ii) energy prices in the form of thermal coal, crude oil, and natural gas.

It may well be that scrap prices follow rather than lead steel prices, but industry experts see 2007 scrap prices either as largely unchanged from 2006 levels, or as falling.

Also, unlike iron ore (subject in recent days to a 9.5% price increase for 2007) most energy prices are forecast to fall in 2007. This applies especially to coal, where some experts predict 2007 price reductions of ~8 per cent, driven largely by improving infrastructure in Australia and higher output in Indonesia.

If we assume continued price cyclicality and recognise that the last peak of the price cycle was in mid-2006, this points us to the next pricing trough being around Q4 2007 and the next pricing peak being in Q3 2008.

Higher 2007 iron ore prices do not therefore mean higher 2007 steel prices. If historical fact is taken as a guide, falling energy prices and the inevitable down-swing of the 'normal' steel price cycle indicate falling steel prices and thus lower revenue streams for steelmakers in 2007.

For more information, contact

Saturday, December 23, 2006

2007 iron ore price increase to be 9.5 percent

Antara, the Indonesia National News Agency reports that the 2007 iron ore price settlement agreed between CVRD and the Baosteel Group Corporation (China's largest steelmaker) is an increase of 9.5 percent over 2006 reference price levels.

This is the first time that benchmark prices were settled with Baosteel, representing all Chinese steelmakers. The result has been a remarkably quick negotiation process, compared to previous years.

For the full report from Antara, please visit

Friday, December 15, 2006

Steel Industry Executive Search - North America

On behalf of a leading steel sector client - a major North American minimill - is currently searching for three exceptional candidates.

These are:

- a Melt Shop Shift Supervisor
- a Rolling Mill Shift Supervisor
- a Process Engineer.

All three positions are at steel plants in Canada. For further information please visit:

Monday, December 04, 2006

2007 iron ore price rise five percent or more

Reports are suggesting that unlike last year - when the Japanese primarily influenced the annual iron ore price negotiations - it will be the Chinese that will have the major impact on the next price settlement.

A report today suggests that according to most analysts, the 2007 price rise will be at least five percent. For more on this topic, please visit: