Commodity Online  Sep 20  Comment 
The new policy is likely to focus on capacity addition and address issues related to raw material security, environmental challenges and land acquisition. The policy is likely to help increase steel production to 300 MTPA by 2025.
The Hindu Business Line  Sep 19  Comment 
Government’s support and favourable policies are essential to meet the target of 300 million tonnes per annum steel production by 2025, Naveen Jindal, Chairman, Jindal Steel and Power, said on Fri...
The Hindu Business Line  Sep 19  Comment 
The key to a manufacturing revival lies in firming up steel output through domestically sourced iron ore
The Economic Times  Sep 19  Comment 
Among blue-chips, TCS's stock gained 2.71 per cent to Rs 2,708.05, while Tata Steel rose by 0.72 per cent to Rs 510.40.
Reuters  Sep 18  Comment 
Subsidies accounted for four-fifths of the profits reported by Chinese steel companies in the first half of this year, a dramatic increase in reliance on state support that illustrates starkly the industrial weakness that is an increasing drag on...
Forbes  Sep 18  Comment 
Actress and environmentalist Daryl Hannah is trying to sell her bohemian abode again. The “Steel Magnolias” and “Splash” actress listed the property in 2012 for nearly $5 million and listed it again this month for $4.25 million.
The Times of India  Sep 18  Comment 
Moody’s has upgraded the ratings of Tata Consultancy Services, Tata Motors, Tata Steel, Tata Steel UK Holdings, Tata Power and Tata Chemicals.
The Hindu Business Line  Sep 18  Comment 
SeekingAlpha  Sep 18  Comment 
By Chronic Bull: ArcelorMittal (NYSE:MT) is the largest steel manufacturer and supplier in the world. More than 35% of its steel is produced in the Americas, about 50% in Europe, and the remaining 15% is produced in other countries like South...
The Hindu Business Line  Sep 18  Comment 
Hero MotoCorp raced up to lead the pack on the NSE by the close on Thursday. At 3.35 pm it had built up gains of 5.80 per cent to quote at ₹2,992.65. The share had ended the overnight session at ₹...




 

Steel is a major input in the construction, shipbuilding, automobile and oil industries. Although the U.S. and Western Europe were largely responsible for the initial development of this industry, since about 1970, China has become a major force in the steel industry. Chinese steel production has grown from 13% of world steel production in 1995 to 32% in 2005. However, China's demand for steel has grown just as fast, and it remains a net importer of steel.

The cost to produce steel varies from country to country, largely with the cost of raw materials, as well as labor and energy. Russia, India, Ukraine, Brazil are able to produce steel at the lowest cost because of a combination of cheap energy and labor. The US's costs are roughly middle of the road. Unlike many other commodities, China is not the lowest-cost steel producer. Chinese labor is cheap, but energy in China is still pricey. As a result, China produces steel at a cost 20% below that in the US, but energy costs in China are higher than they are in Russia, India, Ukraine, and Brazil.

Economic growth across the globe in 2007 and early 2008 spurred a rise in construction activity - steel prices rose. As the 2008 Financial Crisis worsened in late 2008 and early 2009, global demand for steel fell while new steel production capacity was coming into the market - steel prices fell. On May 18, 2009, global steel prices fell to a six-year low.[1]

It should be noted that the majority of steel is utilized by a fairly limited number of purposes. For example, in the United States eight industries consume over 90 percent of the steel used.[2] In North America 2/3 of steel fabricated for consumption is recycled from previous uses.[3]

Prices, Tickers, and Delivery Dates

Steel prices can be quite volatile, moving plus or minus 30% or so through the steel cycle. A typical steel cycle lasts approximately 2-3 years (peak to peak) and this volatility adds significant risk to a steelmaker's revenue stream.

Steel Futures contracts are traded on the New York Mercantile Exchange under ticker symbol HR and are delivered every month of the year. (For more information on commodity tickers, check out the commodity ticker construction page.)

Graph to come.

What Impacts Steel Prices?

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How US steel makers are impacted by a $20 / ton increase in steel prices. Nucor and Dynergy's contracts with customers that fix their margins mean they are less exposed to price fluctuations than US Steel is.
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China represents nearly a third of global steel consumption
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China represents nearly a third of global steel production
  • Economic growth in general drives greater production and construction, activities that consume steel. As the global economy began slowing down in 2008, steel prices fell by almost 50% in the six months after July, after having nearly doubled in the six months before.
  • New construction: Twenty percent of steel is used in construction. As a result, a key metric to watch to forecast future steel prices is property vacancy rates -- higher vacancy rates leads to less construction and lower demand for steel.
  • Foreign demand: China's prodigious consumption has made it a net importer of steel. Fifty percent of China's GDP is spent on fixed-asset production -- things like roads, railways, bridges, and buildings -- compared to only 17% for the United States.[4] However, China's increasing self-sufficiency could displace imports and lead to price drops.[5]
  • Capacity: Increased capacity to produce steel signals lower prices in the future. As a result, capital spending by steel producers is often used as a harbinger of future steel prices - more capital spending today suggests more factories, more capacity and therefore lower prices in the future. Consolidation (steel companies buying each other or going out of business) suggests steel will become less plentiful and therefore more expensive. From the 70s to the turn of the century, production capacity rose at an annual rate of .6%.[6]Then, both undergoing and expecting rapid growth, steel companies increased capacity at more than 7% per year. As demand and demand forecasts began to fall in 2008 and Q1 09, the world was left with 300-400 million metric tonnes of unused capacity.[7]

Companies that benefit from rising steel prices

US Steel, Nucor, and Steel Dynamics are the largest American steel producers. When prices rise, they make more money on every ton of steel they sell. US Steel benefits more from rising steel prices than Nucor and Steel Dynamics, however. Nucor and Steel Dynamics' pricing strategy is to sign adjustable-rate contracts, where the price they are paid varies with the price of inputs such as scrap steel. This means their profits are reliable when prices fall, but means they have less upside when prices rise.

US steel is far more exposed to steel prices than Nucor and Steel Dyanmics. Nucor and Steel Dynamics' strategy has been to lock in spreads in long-term contracts with customers -- the companies pass along increases in raw material costs to their customers, but have limited upside when steel prices rise. Smaller steel producers, such as AK Steel Holding (AKS), Commercial Metals Company (CMC), and Carpenter Technology (CRS), are also beneficiaries of rising prices, although obviously in proportion to their relatively smaller market share.

Steel companies aren't the only parties that benefit from higher steel prices. The companies that provide them with steelmaking raw materials, such as the major iron ore supplier Cleveland-Cliffs (CLF), enjoy the rise in profits as well. Similarly, companies like Harsco (HSC) that provide the steel industry with mill services benefit as well.

Finally, steel traders tend to work off margins of a few percentage points of the selling price of steel. This means that steel trading firms such as Balli Group, Duferco, Stemcor and Salzgitter tend also to benefit from rising steel prices.

Companies that benefit from falling steel prices

  • Gas and oil firms such as Gazprom and Transneft that use steel pipe to distribute the oil and gas. These firms often invest in international, transnational or sub-sea pipelines to transport these fuels to their end-use markets - pipelines that can be hundreds or even thousands of kilometers in length. Given that a one meter length of oil or gas pipeline can weigh near to one tonne - with the pipe costing perhaps $1000 per tonne or more - the cost of welded pipe for a major pipeline can often run into billions of dollars.
Top ten world steel producers, 2005
Rank Company Country Steel output (mt) % of world production
1 Arcelor-Mittal Luxembourg 120 10.6%
2 Nippon Steel Japan 34 3.0%
3 JFE Japan 32 2.8%
4 POSCO South Korea 31 2.7%
5 Shanghai Baosteel China 24 2.1%
6 US Steel US 22 2.0%
7 Nucor US 20 1.8%
8 Corus Group EU 19 1.7%
9 Thyssen Krupp EU 17 1.5%
10 Riva Acciao EU 17 1.5%

Top 10 Steel Producers in year 2007

Company Country Production M.Ton
ArcelorMittal (Global) 116.4
Nippon Steel (Japan) 35.7
JFE (Japan) 34
POSCO (South Korea) 31.1
Shanghai Baosteel Group Corporation (China) 28.6
Tata Steel (Global) 26.6
LiaoNing An-Ben Iron and Steel Group (China) 23.6
Shagang Group (China) 22.9
HeBei Tangshan Iron & Steel Group (China) 22.8
United States Steel Corporation (United States) 21.5
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