The World Cost Curve for HRB is flattening this year. And, a further flattening seems likely by 2017 if global steel demand growth is only moderate. In such a condition, the prices of iron ore and steel scrap may be far lower than in the recent past. (Note: A risk for the steel mills is what might be called the "Iron Pancake," which is a world cost curve so flat that price competition is promoted.)
In the accompanying graphic, WSD portrays operating cost globally to produce hot-rolled band given different price inputs, as indicated below:
Our findings are as follows:
- April 2014. Median global HRB cost at $505 per tonne. Difference between the operating cost of the average First and Fourth Quadrant mills at $147 per tonne.
- Near-term forecast = Late 2014. Median global HRB cost at $482 per tonne. Difference between the operating cost of the average First and Fourth Quadrant mills at $125 per tonne.
- Long-term forecast = Perhaps 2017 (in 2014 U.S. dollar terms). Median global HRB cost at $460 per tonne. Difference between the operating cost of the average First and Fourth Quadrant mills at $95 per tonne.
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