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