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Consumption of steel products worldwide follows the trend of economic activity in individual countries. There is a clear trend for high levels of consumption of steel products at certain stages of economic development, which are associated with rapid urbanisation and construction, combined with industrialisation and the growth of manufacturing industry. The urbanisation and construction provide strong demand for steel long products (bars, heavy and light sections) and some flat products (plate and galvanised sheet for construction, including coated sheet), while the growth of manufacturing industry provides demand for flat products (hot- and cold-rolled coil, stainless steel, etc).
As more countries pass through this development phase, following on a smaller scale the path of China from the mid-1990’s onwards, steel demand will increase rapidly in some parts of the world.
The other clear long-term trend is that steel consumption stabilises or starts to fall in relation to GDP at high levels of income per head. This means that there will continue to be slow growth in steel consumption in the developed countries of North America, Western Europe and Japan.
For longer discussion of global steel industry trends [including technology trends, price cost trends etc] visit our world steel industry trends page.
Our economists have been considering the steel price outlook for 2015. We have deliberated on this by considering the likely change in world steel capacity utilisation between 2014 and 2015.
Global steel demand [thus production] is likely to increase at crude steel level by ~40mt in 2015 (according to worldsteel).
Global steel capacity is likely to increase by ~60mt in 2015 (according to OECD).
On this basis, we calculate that global capacity utilisation will fall very slightly in 2015, from 76.3% to 76.1%.
Thus, we predict that steel prices in 2015 will be very close to (or fractionally below) average 2014 price levels.
The decline of UK steelmaking continues.
According to a press report published today, the Tata steelworks in Port Talbot is set to shed 400 jobs, with chief executive Karl Koehler saying the moves are necessary for the company to remain competitive.
High business rates and rising energy costs were cited as reasons for the job losses.
“Steel demand and prices are likely to be under pressure for some years. Our business rates in the UK are much higher than other EU countries’ and our UK energy costs will remain uncompetitive until new mitigation measures come into effect”, said Koehler.
A 45-day consultation period will begin shortly. This is not the first time the Tata boss has warned about the consequences of high energy costs. In January, Koehler urged the government to slash energy bills.
For original press report, visit http://www.cityam.com/1404212347/tata-steelworks-cuts-400-jobs-due-uncompetitive-energy-costs
The press have just reported the completion by ArcelorMittal / Nippon Steel & Sumitomo Metal Corporation of the purchase of ThyssenKrupp’s North American Calvert plant. For full report, visit http://uk.finance.yahoo.com/news/arcelormittal-completes-acquisition-thyssenkrupp-steel-211100386.html.
This Calvert plant comprised a state-of-the-art hot strip mill with tandem cold rolling and further coating capability and some 4.3 million tonnes of installed capacity, and was commissioned around November 2007. The facility apparently cost $5 billion to set up, and was reportedly sold for $1.55 billion.
Now – what does this episode tell us about the quality of strategic thinking at ThyssenKrupp? I ask this question, because as a steel industry adviser I am forever being asked to comment on upside and downside scenarios. We do of course also live in a world where the number of tools available for a risk assessment is greater than ever before. The question thus arises: how did ThyssenKrupp’s management allow this disaster to happen?
Were the management of ThyssenKrupp so sure of their own views that they did not want to listen to any cautionary voices? Do ThyssenKrupp not like using external consultants? Is the German model of corporate governance perhaps suboptimal is some rather fundamental way?
This episode should not only teach managements a lot about how to properly manage large investment decisions, but perhaps also remind us all about the value of independent external perspective.
Dr Andrzej M Kotas
Metals Consulting International Limited
Did you know that we help clients with steel demand forecasts? And with steel price forecasting?
If you are interested in steel consumption today / tomorrow for any steel product or in the likely evolution of steel prices in any particular steel product niche, contact us at http://www.steelonthenet.com/statistics.html
Dr Andrzej M Kotas
Mobile: +44 775 149 0885
We are often asked – what exactly is a steel sector due diligence study all about?
I will answer as follows. A steel industry due diligence study is a review of a steel firm, that reports on certain important techno-commercial issues. If you want to invest in a steel business, you are quite likely to want a due diligence report that covers market, technical and financial issues. Sometimes, environmental matters are included in this list as well.
So the due diligence investigation typically consist of a visit from a few steel experts [e.g. technical, market, financial, environmental experts] who take a look at the main issues in their expert area. For example, a steel market expert will look at steel demand today and in the future; will consider market requirements in terms of quality, size and shape; will review the competition; consider future capital investment; will forecast future sales and market share; will assess steel prices today; establish steel price trends in the near future; will project current and future sales revenues; will review steel distribution arrangements and so on. Once the expert visits the steel plant and talks to plant management about the relevant issues – and often validates these by speaking to local customers – he or she usually then prepares a written report on this topic. That market report – together with similar technical, financial, environmental or other sections – is an important chapter in the final due diligence study.
A well-prepared due diligence investigation will of course be internally consistent. This means that sales assumptions in the market study will relate to steel production levels in the technical study; both the sales and the production volumes will also relate to the financial assessments describing fixed and variable costs of production; and so on.
Crucially, a due diligence study should also be independent. This is important because if financiers are to have confidence in the written views and opinions contained in the report, it is important that such opinions are objective and without bias.
To learn more about how our consultants can help in preparing a due diligence or feasibility study, visit our steel feasibility study page.
Dr Andrzej M Kotas