Final Thoughts

September 12, 2014

With iron ore approaching $80 per dry metric ton for spot 62% Fe fines in China (according to our Asian iron ore trading source as well as The Steel Index), I asked John Eckstein, retired metallurgist last with Severstal Sparrows Point and one of our Steel 101 instructors, to comment on the changes the price of iron ore has made to produce a slab and hot band. We compared ore at $120/dmt versus ore going to $80/dmt and he came up with the following:

At $120/dmt the cost of the slab is $505 per net ton and the hot band is $535 per net ton.

At $80/dmt the cost of the slab is $451 per net ton and the hot band is $481 per net ton.

If you want to learn more about the steelmaking process (including how commodity prices affect cost and how it is bought and sold) we still have a few seats left at our next (and last one during 2014) Steel 101: Introduction to Steelmaking & Market Fundamentals workshop. The workshop will be held on October 7 & 8, 2014 in Fort Wayne, Indiana and will include a tour of the Steel Dynamics flat rolled steel mill. Cost for the workshop is $2000 per person with discounts of $100 for SMU member companies and another $100 per person for those companies sending more than one person. Details and registration are on our website or you can contact our office at 800-432-3475 (info@SteelMarketUpdate.com).

This should be a very interesting week (or weeks) as AK Steel and Steel Dynamics close on the assets of Severstal North America and absorb their order books into their company. As mentioned in our first article, we do not know how the new management will handle the commercial people other than the moves that were already made at Dearborn. We assume that each company will notify the customer base of each plant what they can expect and who will handle their accounts after they close on the facilities.

From here we wish everyone well and the best of luck.

From our perspective the real story in the coming months will be how will consolidation affect steel supply and pricing?

We would appreciate any comments that you would like to make on the subject. Please send them to me directly at: John@SteelMarketUpdate.com

As always your business is truly appreciated by all of us here at Steel Market Update.

John Packard, Publisher