MCI Steel Price Projections Report

WORLD STEEL PRICE PROJECTIONS
ECONOMETRIC MODELLING REPORT April 2011
Metals Consulting International Limited http://www.steelonthenet.com
Metals Consulting International Limited
Research Report
CONTENTS CONTENTS ........ DISCLAIMER 1. INTRODUCTION .... 1.1 Background .. 1.2 Objective of this report . 1.3 Sources of information . 1.4 Abbreviations ... 1.5 Product definitions and price levels ......... HISTORIC STEEL PRICES 2.1 Price levels and price volatility..... 2.2 Historic data . FUTURE STEEL PRICES ... 3.1 The MCI econometric model ... 3.2 Strong and weak correlations ... 3.3 Leading steel price indicators ... 3.4 Steel price predictions to 2015 . CONCLUSIONS .. APPENDICES . Appendix 1: Average world HRC and rebar prices 1996-2010 ... Appendix 2: Historic prices of selected commodities, 1996-2010 .. Appendix 3: Metallics prices, 1994-2010 Appendix 4: Price projections for selected commodities ..... Appendix 5: Price projections for hot rolled coil and rebar 2011-2015... Appendix 6: F.o.b prices versus market prices the year 2010 differential
Page 1 2 3 3 3 4 4 5 6 6 7 8 8 9 13 13 16 17 18 20 23 24 25 26
2.
3.
4. 5.
For further info, visit: http://www.steelonthenet.com
Econometric modelling report steel prices April 2011
Page 2
Research Report
DISCLAIMER
The viewpoints contained in this report are based in large part on information gathered from the public domain and on expert opinions developed by MCI. Readers are however advised to supplement the information and opinions contained in this report with advice from their own professional advisers as investment or other decisions based solely on the information contained herein may not result in expected outcomes. Moreover, whilst the views contained herein are considered by MCI to be sound, MCI makes no representation as to the accuracy or completeness of the information [including projections provided]. MCI has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth changes or subsequently becomes inaccurate. The report is provided for informational purposes only. It is not to be construed as an offer to buy or sell, or as a solicitation of an offer to buy or sell any financial instrument or asset, or to participate in any particular trading or investment strategy. In no event shall MCI or any other party involved in marketing or distributing this study accept any liability for any direct, indirect, special, punitive, consequential or any other damage associated with use of this report. Use of this study is subject to acceptance of these terms.
Page 3
Research Report
1. 1.1
INTRODUCTION Background
Recent price volatility in the international steel markets saw prices for hot rolled steel coil which is very much a benchmark steel product rise from under $600/tonne in the first quarter of 2008 to almost ~$1000/tonne by mid-2008. Just a few months later, by early 2009, the hot rolled coil price was under $500/tonne, with similar price oscillations seen for reinforcing steel bar (Exhibit 1.1). Never in recent history had such wild and sudden swings in the international steel price been witnessed before. For some months after the onset of the crisis, it was felt that it would be several years or even longer before prices would return to those heady levels of mid-2008. But in the January 2011, discussions again turned to benchmark steel prices hitting $1000/tonne within a matter of months1. Exhibit 1.1: Historic prices of hot rolled coil and rebar
Source: http://www.steelonthenet.com. Figures are average world f.o.b. export prices.
The scene is set therefore for what may be very much more variability in steel pricing in the future than has been evident in the past. In these circumstances, the ability to correctly judge future steel price movements becomes yet more difficult. Among the main providers of historic and future steel price data2, few of the experts offer insights into steel price forecasting methodology. Yet billions of dollars of capital spend in iron and steel plant are often underpinned by price projections which are central to the financial evaluations associated with these investments. 1.2 Objective of this report
The objective of this report is to offer some insights into the econometric forecasting process for predicting steel prices, at least as developed by MCI3 for hot rolled coil and rebar. The methodology as outlined in the present study should be regarded as a starting point, since a more elaborate methodology is quite likely to improve on the accuracy of some of the forecasts that are presented. If however the deliberations that are set out in the pages that follow at least trigger a wider discussion about international steel price forecasting and perhaps even the further evolution of steel price forecasting methodology - then the authors will consider that further achievement to be an added bonus.
1 2
Source: MEPS. Amongst the main providers of this data, we would list CRU, GFMS, MBR and MEPS. 3 The MCI team published their original econometric steel price forecasts in December 2006 on the companys weblog at http://steelonthenet.blogspot.com/2006/12/steel-price-forecast-2007-2008.html Econometric modelling report steel prices April 2011 Page 4
Research Report
1.3
Sources of information
All information used in preparation of this report was taken from publicly available sources. The main sources included: 1.4 Monthly f.o.b. export price statistics for hot rolled coil, obtained from the Iron & Steel Statistics Bureau [ISSB] in the UK; Commodity price data from the International Monetary Fund [IMF]; Historic energy cost data and price projections from the U.S. Energy Information Administration [EIA]; Commodity prices and price forecasts from the World Bank. Abbreviations
Common abbreviations used within this report include the following. $ $/b Al Btu c.i.f. CIS EIA f.o.b. HRC IMF ISSB kWh MCI Ni NSW Pb Sn T or t UK US Zn United States dollar Dollars per barrel Chemical symbol for aluminium British thermal unit Cost, insurance, freight Commonwealth of Independent States U.S. Energy Information Administration Free on board Hot rolled coil International Monetary Fund Iron and Steel Statistics Bureau Kilowatt hour Metals Consulting International Limited Chemical symbol for nickel New South Wales Chemical symbol for lead Chemical symbol for tin metric tonne (1000 kg) United Kingdom United States of America Chemical symbol for zinc
Other abbreviations are as defined in the text.
Page 5
Research Report
1.5
Product definitions and price levels
Readers are advised that the prices used in the present report are average world f.o.b. export prices. This was a deliberate choice, because with internationally traded hot rolled coil and rebar markets typically involving monthly exports of 1 or 2 million tonnes or more these prices are considered to be representative4. Whilst representative on the one hand, the worldwide prices used in the present report are also however very much dominated by exports from countries such as Russia and Ukraine; whose prices are often at the lower end of the pricing spectrum5. Additionally, export prices [generally expressed in terms of an f.o.b. local port price] are usually lower than market price transactions by a differential of around 10%-12%6. Some readers may as a result wish to reference just the trends described in the present report, rather than make use of the absolute price levels that are indicated in dollar per tonne terms.
4 5
In more shallow markets, the risk arises of price distortions arising through atypical trades. In their April 2011 report [Flat Steel Products One Year Forecast], GFMS reported a price differential between US and CIS hot rolled coil prices of ~$220/tonne. Whilst such a cost difference is a little unusual, pricing differentials of $100-$150/tonne are not uncommon. 6 As a generalization, market prices tend to exceed c.i.f. import prices - which in turn tend to exceed f.o.b. export prices (for most finished steel products). This may be partly because of differences in application [with traded goods geared more to the commodity end of the spectrum and locally-sold steel geared more to higher quality steel] as well as because of differences in product mix [e.g. grade issues], but can amount to a difference of ~10-13% (see Appendix 6). The matter suggests that caution be used whenever reference is made to the steel price the basis of which should always be defined. Econometric modelling report steel prices April 2011 Page 6
Research Report
2. 2.1
HISTORIC STEEL PRICES Price levels and price volatility
Some historic prices for hot rolled steel coil and for reinforcing steel bar are set out in Exhibit 2.1 below. Exhibit 2.1: Historic steel prices Hot rolled coil and reinforcing bar
Source: ISSB. Figures are average world f.o.b. export prices.
The chart shows several notable characteristics, which include: A very strong similarity between flat and long product prices (as defined by hot rolled coil and reinforcing bar, respectively). At first sight this may not be especially surprising, since both are essentially commodity steel products. However, readers will note that flat products (such as HRC) are typically produced using steel from a basic oxygen furnace, where iron ore is used as the main source of iron for blast furnace production, with coal and coke as main energy sources; whilst long products (such as rebar) are more generally produced using steel from an electric arc furnace, with ferrous scrap as the main source of iron units. Given this difference in the production process routes, the similarity in historic prices is perhaps more surprising. A cyclicality of steel prices. Ignoring the changes in the steel price in 2008 / 2009, small peaks and troughs in world steel prices are evident every 3-4 years. In the charts above, these movements are evident as small peaks in mid-2000, in mid-2003, in mid2006, in early 2007 and in mid-2010. A common economic explanation of this phenomenon is based on high prices at any particular time point fuelling investment in additional steelmaking capacity, which leads to some overcapacity, which in turn fuels a downward correction in steel prices [because of more competition]; followed by partial industry exit, a reduction in steel supply, and a consequent increase in steel prices a cycle which is then repeated.
Page 7
Research Report
The most prominent aspect of the prices shown in Exhibit 2.1 however is the marked price oscillation that was evident over the period late 2008 to early 2009, which was brought on by the recent financial crisis. This had its roots in the US subprime mortgage crisis, which began around 2005-2006, with high default rates on so-called subprime mortgages being fuelled by excessive bank lending, declining lending standards and possibly inappropriate assurances of some of the leading credit agencies. As the problems became more apparent during 2007 and 2008, so these exposed more pervasive weaknesses in the global financial banking system and in the underlying financial regulatory framework especially. These weaknesses slowly crystallised as enormous accounting losses reported by the major banks. Various merger deal proposals and consolidation plans aimed at improvement of balance sheet strength followed. September 2008 however witnessed the collapses of several large financial institutions in the United States. These collapses rapidly evolved into the financial crisis that has been evident throughout 2009 and 2010. Steel prices hit their peak in June, July and August 2008 with hot rolled steel coil prices in some steel markets attaining close to ~$1100/tonne, only to be less than half this level within months7. Since that time, price recovery has been on a slow and generally upward trend, although prices today are only marginally above pre-crisis levels (Exhibit 2.1). 2.2 Historic data
For reference, Appendix 1 provides actual price levels for HRC and for rebar [average world f.o.b. export prices] in $/tonne for the period 1996-2010. These figures are the prices used in the econometric analysis described in the present report. Additional historic price data for range of other commodities as used for the econometric analysis is shown in Appendix 2.
Source: MEPS. According to MEPS, average world market prices for HRC hit ~$1099/t in July 2008, falling to ~$513/tonne by July 2009. Rebar price movements were largely similar. Econometric modelling report steel prices April 2011 Page 8
Research Report
2. 3.1
FUTURE STEEL PRICES The MCI econometric model
Econometrics are defined as the application of mathematics and statistical methods to the analysis of economic data8. Accordingly, MCIs econometric model is based on understanding the relationship between historic steel prices and price factors such as: Crude oil (as an indicator of commodity prices, generally) Natural gas (as an important power source for steel pants) Thermal coal (as an important fuel e.g. for steel power plants) Metallurgical coal (used in the blast furnace) Electricity prices (used to power electric arc furnaces) Iron ore (as a dominant source of iron units for BOF steelmaking) Scrap (as a dominant source of iron units for electric steelmaking)
through (i) (ii) analysis of the historic economic data by regression analysis to establish important determinants of steel prices9 use of independent forecasts of the key parameters to predict (via the statistical relationships identified by regression analysis) future steel prices.
Regarding the methodology applied in the MCI econometric model, the forecasting team: made use of historic commodity prices over the period 1996-2010 as published by the IMF and the EIA to determined these statistical relationships used future prices for crude oil, natural as, coal and electricity, as supplied in independent forecasts published by the EIA used future prices for iron ore published by the World Bank with respect to ferrous steel scrap, determined likely future scrap prices10 by: o correlating historic steel scrap prices over the period 1994-2010 with the historic price levels of iron ore, world steel production levels11, and the prices of aluminium, lead, nickel, tin and zinc [for graphic illustration of relationship between different metallics prices, see Appendix 3]
8 9
See http://en.wikipedia.org/wiki/Econometrics Correlating factors may be a preferable term to determinants. 10 This approach was necessary for steel scrap as (i) preliminary econometric modelling indicated that scrap prices were an important determinant of historic steel price levels and (ii) because no independent medium-term estimate of future steel scrap prices was readily available. 11 Some industry commentators consider that scrap prices today largely reflect the difference between demand [as modelled, for example, by current world steel production levels] and supply [as might be characterised by steel demand ~20 or more years ago and entry into the current scrap pool of steel consumed then as cars, white goods etc that are being recycled today]. Econometric modelling report steel prices April 2011 Page 9
Research Report
o determining future scrap prices on the basis of the predicted mathematical correlations using generally available forecasts for metallics prices (e.g. as published by the World Bank) and other assumptions12. The MCI econometric model applied this approach to historic hot rolled steel coil prices and reinforcing bar prices to determine projections for these prices across the medium term, for a 5 year period to end-2015. 3.2 Strong and weak correlations with historic data
The statistical correlations observed with the analytical approach described in Section 3.1 above were as follows. For both HRC and rebar, strong correlations were observed between the historic steel price data and: o Australian thermal coal prices o Metallurgical coal [coking coal] prices o Scrap prices. Inconclusive, weak (statistically insignificant) or inverse correlations were observed for: o o o o o Oil prices US thermal coal prices Natural gas prices Electricity prices Iron ore
The latter observations can to some extent be understood by recognising: In the case of US thermal coal prices, because of their relative flatness over the period 1996-2010. Exhibit 3.1 compares a historic steel price index [a hot rolled coil / rebar price average] with the price indices for US thermal coal to illustrate this point;
Exhibit 3.1: Historic correlation between steel prices and US thermal coal prices
Steel prices versus US thermal coal prices
350
Index [Jan 1996 = 100]
300 250 200 150 100 50 0 1996
2001
2006
2011
Average steel price
Thermal coal price index [USA]
12
MCI further assume that world steel production will continue to grow at ~3.5% per annum. Page 10
Research Report
Source: MCI analysis. For original price data, see Appendix 2.
In the case of natural gas prices, since these too showed little evident correlation with steel prices over the period 1996-2010 (Exhibit 3.2);
Exhibit 3.2: Historic correlation between steel prices and natural gas price
Steel prices versus natural gas prices
500 450
Index [Jan 1996 = 100]
400 350 300 250 200 150 100 50 0 1996 2001 2006 2011
Average steel price
Natural gas price
In the case of electricity prices, because of a relative flatness here also with electricity price showing marked seasonal sensitivity but little overall correlation to the international steel price (Exhibit 3.3);
Exhibit 3.3: Historic correlation between steel prices and US electricity price
Steel prices versus electricity price
350 300 250 200 150 100 50 0 1996
Index [Jan 1996 = 100]
2001
2006
2011
Average steel price
Electricity price index
Page 11
Research Report
In the case of iron ore, because of the pricing flatness also evident for this raw material a flatness arising from the traditional annual price-setting approach used in iron ore pricing up until mid-2010 (Exhibit 3.4).
Exhibit 3.4: Historic correlation between steel prices and world iron ore prices
Steel prices versus iron ore price
1400 1200 1000 800 600 400 200 0 1996
Index [Jan 1996 = 100]
2001
2006
2011
Average steel price
Iron ore price index
Some of the above conclusions may be the result of selecting US rather than world or other regional commodity price data. Stronger statistical correlations were however nonetheless evident with Australian thermal coal [steam coal]; with US metallurgical [or coking] coal; and with international ferrous scrap prices and these relationships are illustrated in Exhibits 3.5, 3.6 and 3.7.
Exhibit 3.5: Historic correlation between steel prices and Australian thermal coal prices
Steel prices versus Australian thermal coal prices
600 500 400 300 200 100 0 1996
Index [Jan 1996 = 100]
2001
2006
2011
Average steel price
Thermal coal price index [Aust]
Page 12
Research Report
Page 13
Research Report
Exhibit 3.6: Historic correlation between steel prices and US metallurgical coal prices
Steel prices versus metallurgical (coking) coal price
400 350
Index [Jan 1996 = 100]
300 250 200 150 100 50 0 1996
2001
2006
2011
Average steel price
Metallurgical coal price index
Exhibit 3.7: Historic correlation between steel prices and ferrous scrap prices
Steel prices versus ferrous scrap prices
450 400
Index [Jan 1996 = 100]
350 300 250 200 150 100 50
a. b. 0 1996 c.
2001
2006
2011
Average steel price
Ferrous scrap price index
Correlation does not of course prove causality. However, rising international steel prices are frequently attributed to rising raw material costs. With energy and metallics representing important elements of total steel cost13 the strength of the correlations shown in Exhibits 3.5 (Australian thermal coal), 3.6 (metallurgical coal) and 3.7 (ferrous scrap) is not therefore perhaps altogether unsurprising.
13
See cost models for BOF or EAF liquid steel at http://www.steelonthenet.com/steel_cost_bof.html and at http://www.steelonthenet.com/steel_cost_eaf.html. Econometric modelling report steel prices April 2011 Page 14
Research Report
3.3
Leading steel price indicators
Exhibits 3.5-3.7 are of further interest from the perspective of possible leading indicators of future steel prices14. Thus, in addition to each of the prices charts for Australian thermal coal, US metallurgical coal and ferrous scrap showing a fair good fit to the historic steel price data, the charts are notable also for: Australian thermal coal prices (see Exhibit 3.5) providing an early indication of the probable direction of future steel price movements. For example, around the time of the summer 2008 peak in commodity prices, Australian thermal coal prices started falling significantly between July and August 2008 at a time when steel prices were still on the rise [see Appendix 1, Appendix 2] Ferrous scrap prices similarly appearing to provide another leading indicator of steel price movements o see for example the period July 2008 to November 2008, during which scrap prices almost halved [Appendix 2] o notice that the corresponding correction for steel prices [both hot rolled coil and rebar] was not until two months later, over the period September 2008 to January 2009 [see Appendix 1].
3.4
Steel price predictions to 2015
Just as historic data may be assessed to establish price dependencies in the past, so also the econometric assessments obtained in this way may be used to determine future steel prices. Such an approach benefits all the more if independent forecasts of key variables can be used.
For the purpose of the present report, independent forecasts of the key variables were obtained:
directly from sources such the EIA and from the World Bank
14
The authors note that the steel prices used in this report, as well as the scrap and coal prices, all derive from trade statistics, with all these figures being reported as f.o.b. prices. These prices therefore differ from electricity prices (for example) which are current - where price reporting is not subject to delays in the recording of trade export transactions. Because the steel prices as well as the scrap prices as well as thermal coal prices used in this report all derive from the recorded international trade data, MCI do not consider that the leading indicator discussion in the report above is the result of artificial construct, arising from the use of current prices for one set of data against the use of (delayed f.o.b.) trade data for another set of data. Rather, we would expect data sets such as steel prices and ferrous scrap prices or thermal coal prices to be comparably delayed; and the conclusion concerning ferrous scrap prices / Australian thermal coal prices representing useful leading indicators of international steel prices to therefore be valid. Econometric modelling report steel prices April 2011 Page 15
Research Report
indirectly by correlations of historic scrap prices with other metallics prices [see Appendix 3], based on independent projections (also from the World Bank) of the future prices of aluminium, lead, nickel, tin and zinc.
Forecasts of the main independent variables used to forecast future international steel prices are indicated in Appendix 4. Applying the regression analysis to the projected parameter values shown in Appendix 4 resulted in the steel price forecasts indicated in Exhibits 3.8 and 3.9.
Exhibit 3.8: F.o.b. hot rolled coil prices projections of the econometric model
Source: MCI econometric forecast, April 2011. F.o.b. export prices are shown. For market prices and market price projections, add ~13.5% to figures shown [See footnote 6 and appendix 6].
Exhibit 3.9: F.o.b. reinforcing bar prices projections of the econometric model
Page 16
Research Report
Source: MCI econometric forecast, April 2011. F.o.b. export prices are shown. For market prices and market price projections, add ~13.5% to figures shown [See footnote 6 and appendix 6].
With both hot rolled coil and reinforcing bar, it is evident from Exhibits 3.8 and 3.9 that: the fit of the predicted historic data to the actual historic data is close15 the forward projection is for maintained relatively high future steel prices: o with average prices remaining well above pre-crisis levels from now to 2015 o with prices staying relatively constant across 2011 to 2013 [Appendix 5]16 o with further price rises expected in 2014 and 2015, which will raise f.o.b. HRC / rebar prices some $150 per tonne in the medium-term [see Appendix 5] but without return to a scenario involving f.o.b. steel prices at $1000-$1100/tonne [prior to 2016].
The latter result derives especially from the moderation of thermal coal prices17 that is to be expected over the medium term, which will offset some of the cost-increasing influences of rising scrap costs and other rising energy prices (Appendix 4).
15
The average absolute error in predicting historic versus actual prices over the period 1996-2010 with the MCI econometric model works out at ~11% for HRC or ~9% for rebar. 16 Ignoring short-term peaks and troughs (of just a few weeks). 17 Australian thermal coal prices can be expected to fall according to several expert sources, including the World Bank at http://web.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTDECPROSPECTS/EXTGBLPROSPECTS/0,, contentMDK:20675357~menuPK:627723~pagePK:2904583~piPK:2904598~theSitePK:612501,00.html and AustCoal [see Section 4] at http://austcoalconsulting.com/downloads/1%20Australian%20Coal%20Export %20Forecast%20to%202015.pdf. The price reduction is expected [notwithstanding rising demand] because of increasing thermal coal supply in the coming years resulting from mine development and from infrastructure investment - especially in the Pacific Basin [see http://www.coaltrade.org/wpcontent/uploads/2011/02/Watkins.pdf] although the EIA also cite falling steam coal market share against natural gas [http://www.eia.doe.gov/steo/] as a further factor. Econometric modelling report steel prices April 2011 Page 17
Research Report
4.
CONCLUSIONS
The purpose of this report was to present a simple econometric model for forecasting international steel prices. Fairly good correlations were identified between historic hot rolled coil and rebar prices on the one hand; and historic thermal coal [Australian], metallurgical coal and scrap prices on the other. Regression analysis based on econometric modelling of the historic data indicated that steel prices were likely to rise in the medium term: with significant price rises of the order of ~$150/tonne to be expected for both hot rolled coil and reinforcing bar over the period to end-2015; but without export f.o.b. steel prices attaining the $1000-$1100/tonne levels seen during mid-2008 in the coming years.
Anticipated increases in metallics prices [ferrous scrap] as well as in energy costs will underpin the majority of these price rises. These upward price pressures will however be offset by thermal coal prices which can be expected to decline as new coal supply comes into the marketplace.
Page 18
Research Report
APPENDICES
Page 19
Research Report
Appendix 1: Average world HRC and rebar prices 1996-2010, $/tonne

Year 199 6 Month 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 HRC 382 375 359 336 331 343 332 318 327 321 319 322 302 299 278 310 316 317 309 313 289 326 333 294 297 294 291 287 286 278 270 264 270 252 247 234 215 210 210 210 208 208 215 217 221 233 236 243 250 250 260 260 257 261 267 265 259 249 239 Rebar 280 282 266 274 258 271 295 285 270 286 283 266 275 266 264 265 279 261 276 266 280 285 292 273 273 264 257 260 249 250 241 244 240 235 217 212 200 204 198 195 200 201 207 210 212 217 211 204 205 201 208 213 207 215 210 208 204 207 199 Year 2001 Month 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 HRC 222 219 215 208 207 211 197 201 205 199 194 204 182 182 196 181 205 214 232 244 256 264 265 271 284 288 293 297 298 291 286 278 283 298 299 305 319 335 348 389 415 433 466 480 491 510 527 534 530 541 557 553 551 510 454 423 424 416 419 Rebar 207 199 196 210 206 217 248 204 206 204 201 199 198 194 194 195 200 213 213 217 223 227 230 222 232 247 262 271 278 273 273 267 271 280 279 283 301 322 370 419 445 436 416 412 429 439 438 424 417 413 416 417 412 393 373 379 394 407 404
1997
2002
1998
2003
1999
2004
2000
2005
Iron & Steel Industry - Capital Investment Costs
Page 20 / 29
Research Report
12
229
197
12
410
398
Appendix 1: Average world HRC and rebar prices 1996-2010, $/tonne (contd)
Year 2006 Month 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 HRC 405 399 401 411 447 476 547 517 523 531 520 504 494 497 517 531 547 556 554 555 561 564 585 567 592 607 648 712 777 844 930 967 949 872 728 594 Rebar 393 393 403 413 434 454 475 485 500 493 479 465 466 484 501 528 567 571 578 563 564 567 563 563 604 655 722 789 860 980 1,092 1,135 1,089 774 529 492 Year 2009 Month 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 HRC 515 483 485 452 431 426 438 460 506 534 533 513 516 525 545 574 623 634 651 617 611 638 625 610 Rebar 486 470 437 422 439 451 444 465 489 497 478 469 475 492 506 572 607 581 553 554 591 596 594 591
2007
2010
2008
Prices are average world export prices f.o.b. local port in $/metric tonne [source: ISSB].
Page 21
Research Report
Appendix 2: Historic prices of selected commodities, 1996-2010

Year 1996 Month 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 Oil $/b 18.9 19.1 21.3 23.6 21.2 20.4 21.3 21.9 24.0 24.9 23.6 25.4 25.2 22.2 21.0 19.7 20.8 19.2 19.6 19.9 19.8 21.3 20.1 18.3 16.7 16.1 15.1 15.3 14.9 13.7 14.1 13.4 15.0 14.4 13.0 11.3 12.3 12.0 14.4 17.2 17.8 17.7 19.9 21.2 23.5 22.9 25.1 26.0 27.2 29.2 29.9 25.8 28.8 31.9 30.0 31.3 33.9 33.1 34.4 28.4 Nat gas $/1000m3 105.6 138.0 105.2 81.1 80.7 89.7 92.1 73.5 65.9 81.8 110.9 137.3 118.1 76.8 68.1 72.4 79.8 79.3 78.3 87.9 102.6 110.2 105.6 83.8 75.9 79.6 80.0 88.3 77.5 77.2 78.9 66.8 70.6 69.3 75.7 62.0 66.4 64.0 63.9 76.0 81.3 83.1 82.8 100.3 93.5 96.8 84.0 84.7 86.5 95.7 100.1 109.3 129.2 154.3 143.6 159.4 182.3 180.8 198.8 320.9 US coal $/m Btu 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.2 1.2 1.2 1.2 1.3 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 Aust coal $/tonne 39.37 39.28 39.01 39.33 38.2 38.2 38.4 38.35 38.1 37.6 35.7 35.35 35.23 34.6 34.5 35.4 35.73 34.5 35 36.93 37.15 37.15 33.6 31.4 31.4 33.44 31.88 31.18 30.28 30 30 26.2 27.09 27.1 26.1 26.1 26.1 26.1 26.1 26.1 26.1 26.1 26.1 26.1 26.1 25.6 25.1 25.1 25.1 25.1 25.1 25.1 25.6 25.6 25.6 25.6 27.15 27.15 27.15 30.75 Met coal $/ton 46.3 46.3 46.3 45.7 45.7 45.7 45.1 45.1 45.1 45.0 45.0 45.0 46.6 46.6 46.6 45.6 45.6 45.6 44.7 44.7 44.7 45.0 45.0 45.0 46.1 46.1 46.1 44.7 44.7 44.7 43.9 43.9 43.9 43.5 43.5 43.5 44.9 44.9 44.9 42.0 42.0 42.0 40.3 40.3 40.3 40.2 40.2 40.2 40.5 40.5 40.5 38.2 38.2 38.2 39.5 39.5 39.5 37.7 37.7 37.7 Elect c/kWh 4.5 4.5 4.5 4.5 4.5 4.7 4.9 4.8 4.8 4.6 4.5 4.4 4.4 4.4 4.4 4.3 4.4 4.6 4.8 4.8 4.7 4.6 4.5 4.4 4.4 4.3 4.3 4.3 4.4 4.7 4.9 4.8 4.6 4.4 4.3 4.3 4.3 4.3 4.2 4.2 4.3 4.5 4.8 4.9 4.6 4.5 4.3 4.2 4.3 4.3 4.3 4.3 4.5 4.8 5.0 5.1 4.8 4.7 4.6 4.9 Iron ore $/tonne 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.7 13.7 13.7 13.7 13.7 13.7 13.7 13.7 13.7 13.7 13.7 13.7 12.2 12.2 12.2 12.2 12.2 12.2 12.2 12.2 12.2 12.2 12.2 12.2 12.7 12.7 12.7 12.7 12.7 12.7 12.7 12.7 12.7 12.7 12.7 12.7 Scrap $/tonne 133 136 126 131 137 126 131 133 115 126 119 112 119 119 111 120 120 112 129 122 108 124 128 107 117 120 116 109 107 103 99 96 95 85 79 78 78 78 78 73 76 76 78 78 79 82 80 82 89 91 91 92 90 90 89 84 84 86 85 87
1997
1998
1999
2000
Page 22
Research Report
Appendix 2: Historic prices of selected commodities, 1996-2010 (contd)

Year 2001 Month 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 Oil $/b 29.5 29.6 27.2 27.4 28.6 27.6 26.4 27.5 25.6 22.2 19.6 19.3 19.7 20.7 24.4 26.2 27.0 25.5 26.9 28.4 29.7 28.9 26.6 29.4 33.0 35.8 33.3 28.1 28.1 30.7 30.8 31.6 28.3 30.3 31.1 32.1 34.2 34.7 36.7 36.7 40.3 38.0 40.8 44.9 45.9 53.3 48.5 43.2 46.8 48.0 54.2 53.0 49.8 56.4 58.7 65.0 65.5 62.4 58.3 59.4 Nat gas $/1000m3 294.2 199.9 186.4 186.6 151.0 134.2 111.9 106.4 78.9 88.9 84.8 87.2 81.3 83.2 109.1 123.4 126.2 116.1 107.6 111.1 127.9 148.8 146.2 170.9 196.3 277.3 214.0 190.0 209.3 210.7 181.0 179.5 166.4 166.8 161.7 221.0 221.4 193.6 194.3 205.8 228.1 225.6 213.7 194.7 186.0 229.6 222.7 237.0 221.5 221.0 239.4 258.3 233.1 258.6 275.2 342.9 447.0 490.8 370.8 469.8 US coal $/m Btu 1.2 1.2 1.2 1.2 1.2 1.3 1.2 1.2 1.2 1.2 1.2 1.2 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.2 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.5 1.5 1.5 1.5 1.6 1.5 1.5 1.6 1.6 1.6 1.6 1.6 Aust coal $/tonne 32.1 32.1 32.6 33.5 33.8 33.9 34 33.8 32.8 32.4 29.4 27.35 29.1 29.85 29.55 28.84 28.63 26.65 24.9 24 24.45 26.25 26.25 26.25 26.68 26.95 26.14 25.13 24.96 25.82 26.09 27.13 28.61 29.46 32.05 36.43 40.45 44.73 52.43 57.05 60.47 63.8 65.76 63.48 59.33 60.67 56.6 55.98 56.83 53.46 54.56 54.91 54.98 54.64 54.54 52.63 48.48 45.49 40.78 40.96 Met coal $/ton 39.3 39.3 39.3 40.1 40.1 40.1 43.2 43.2 43.2 44.7 44.7 44.7 46.8 46.8 46.8 44.2 44.2 44.2 45.3 45.3 45.3 45.7 45.7 45.7 46.3 46.3 46.3 44.6 44.6 44.6 43.1 43.1 43.1 44.0 44.0 44.0 54.1 54.1 54.1 65.3 65.3 65.3 67.3 67.3 67.3 68.4 68.4 68.4 73.7 73.7 73.7 81.3 81.3 81.3 85.9 85.9 85.9 86.0 86.0 86.0 Elect c/kWh 4.8 4.8 4.9 4.9 5.0 5.2 5.6 5.5 5.3 5.1 4.8 4.8 4.7 4.8 4.7 4.7 4.8 5.0 5.3 5.2 5.0 4.9 4.7 4.7 4.9 5.0 5.0 5.0 5.1 5.3 5.5 5.5 5.2 5.1 4.9 4.9 5.0 5.0 5.0 5.1 5.2 5.5 5.6 5.7 5.4 5.3 5.1 5.1 5.1 5.1 5.1 5.2 5.3 5.7 6.0 6.0 6.0 5.9 5.7 5.7 Iron ore $/tonne 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.3 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 14.1 14.1 14.1 14.1 14.1 14.1 14.1 14.1 14.1 14.1 14.1 14.1 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 28.7 28.7 28.7 28.7 28.7 28.7 28.7 28.7 28.7 28.7 28.7 28.7 Scrap $/tonne 87 89 87 85 84 84 87 87 87 90 89 87 106 107 112 105 110 115 131 109 140 104 109 112 123 131 140 139 140 132 123 129 134 146 149 156 174 195 215 212 198 187 185 213 220 226 244 239 230 235 233 229 213 200 188 194 219 216 210 204
2002
2003
2004
2005
Page 23
Research Report
Appendix 2: Historic prices of selected commodities, 1996-2010 (contd)

Year 2006 Month 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 Oil $/b 65.5 61.6 62.9 69.5 70.9 70.9 74.4 73.0 63.8 58.9 59.1 62.0 54.2 59.3 60.6 63.9 63.5 67.5 74.1 72.4 79.9 85.9 94.8 91.4 93.0 95.4 105.5 112.6 125.4 133.9 133.4 116.6 103.9 76.6 57.3 41.4 41.7 39.2 48.0 49.8 59.1 69.6 64.1 71.1 69.4 75.8 78.0 74.5 78.3 76.3 81.3 84.5 73.7 75.4 76.2 76.6 75.3 81.9 84.2 89.2 Nat gas $/1000m3 312.7 270.9 247.7 258.1 224.9 223.3 222.2 256.8 176.3 210.4 266.8 242.3 235.1 288.2 256.0 273.6 275.1 264.5 224.0 223.9 218.5 242.5 255.8 256.6 287.4 307.6 338.8 366.5 405.6 456.6 399.2 297.1 274.4 242.5 241.1 210.1 188.4 161.5 142.5 125.8 137.9 136.7 122.0 113.0 107.5 144.0 132.4 192.5 210.3 191.4 154.5 145.4 149.4 172.9 166.6 155.3 140.2 123.6 133.7 152.9 US coal $/m Btu 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.9 1.9 1.9 2.0 2.1 2.1 2.1 2.2 2.2 2.2 2.2 2.2 2.2 2.3 2.3 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.1 2.1 2.2 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.2 Aust coal $/tonne 46.27 51.11 53.3 56.65 56.36 56.12 56.52 54.58 50.46 47.2 49.29 53.3 54.95 56.68 59.34 60.13 60 66 72.12 74.3 73.33 80.15 90.64 97.5 98.3 141.43 126.7 131.79 142.71 171.16 192.86 169.71 160.71 115.71 98.84 84.27 85.71 80.76 65.36 68.1 69.11 76.48 79.07 77.68 72.47 76.15 84.43 89.04 103.93 100.92 101.12 107.3 107.28 105.2 102.84 96.19 101.66 104.41 114.81 126.74 Met coal $/ton 91.9 91.9 91.9 90.1 90.1 90.1 90.7 90.7 90.7 90.7 90.7 90.7 91.8 91.8 91.8 86.5 86.5 86.5 88.0 88.0 88.0 90.2 90.2 90.2 98.9 98.9 98.9 129.9 129.9 129.9 149.3 149.3 149.3 156.7 156.7 156.7 133.9 133.9 133.9 115.3 115.3 115.3 111.6 111.6 111.6 112.9 112.9 112.9 117.4 117.4 117.4 143.7 143.7 143.7 162.5 162.5 162.5 162.5 162.5 162.5 Elect c/kWh 5.8 6.0 5.9 5.9 6.0 6.4 6.6 6.7 6.4 6.2 6.0 6.0 6.1 6.2 6.2 6.2 6.3 6.6 6.7 6.8 6.5 6.5 6.3 6.3 6.2 6.2 6.3 6.5 6.6 7.2 7.6 7.4 7.2 7.0 6.9 6.7 6.9 6.9 6.8 6.7 6.8 7.1 7.1 7.1 6.9 6.7 6.4 6.5 6.5 6.6 6.5 6.6 6.7 7.0 7.3 7.2 7.0 6.8 6.6 6.6 Iron ore $/tonne 34.2 34.2 34.2 34.2 34.2 34.2 34.2 34.2 34.2 34.2 34.2 34.2 37.4 37.4 37.4 37.4 37.4 37.4 37.4 37.4 37.4 37.4 37.4 37.4 62.1 62.1 62.1 62.1 62.1 62.1 62.1 62.1 62.1 62.1 62.1 70.0 72.5 75.6 64.1 59.8 62.7 71.7 84.0 97.7 80.7 86.8 99.3 105.3 125.9 127.6 139.8 172.5 161.4 143.6 126.4 145.3 140.6 148.5 160.6 168.5 Scrap $/tonne 214 217 236 228 247 252 251 260 273 265 245 267 275 283 307 331 320 305 303 301 316 332 316 320 348 381 400 448 490 538 558 518 473 384 239 243 258 273 260 219 232 248 265 281 305 301 284 289 310 323 339 348 379 363 335 303 369 373 368 382
2007
2008
2009
2010
Page 24
Research Report
Appendix 3: Metallics prices, 1994-2010
Source: International Monetary fund. Steel scrap prices show an especially strong correlation with aluminium, tin and zinc prices, but poor and statistically insignificant correlations with lead and nickel prices.
Page 25
Research Report
Appendix 4: Price projections for selected commodities Period Oil $/b 89 102 105 109 115 119 Gas $/1000m3 153 148 165 173 178 183 Thermal coal USA $/m Btu 2.23 2.23 2.21 2.24 2.27 2.31 Thermal coal Australia $/tonne 127 121 113 104 101 97 Met coal $/ton 163 145 147 151 152 154 Elect C/ kWh 6.59 6.70 6.69 6.76 6.87 7.01 Iron ore $/tonne 168.5 170 158 152 133 114 Scrap $/tonne 382 427 410 405 423 442
Dec 2010 2011 2012 2013 2014 2015
Source: MCI calculations, based on sources described in the text.
Page 26
Research Report
Appendix 5: Price projections for hot rolled coil and rebar 2011-2015 Year Month 201 1 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 HRC Rebar $/tonne $/tonne 657 659 656 656 655 653 652 651 651 653 657 661 663 665 665 663 659 656 654 652 652 654 659 664 668 670 672 671 668 664 662 661 661 663 673 683 674 688 696 697 698 698 699 701 701 701 696 692 687 683 679 676 678 679 680 681 681 680 676 673 670 668 666 664 665 666 667 668 668 667 672 677 Year Month 201 4 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 HRC Rebar $/tonne $/tonne 691 698 705 709 705 702 700 698 699 701 712 723 732 741 749 754 750 747 745 743 744 746 748 751 753 683 689 695 702 704 705 706 706 706 705 711 717 723 730 737 745 746 747 748 748 748 747 747 746 745
201 2
201 5
201 3
201 6
Source: MCI econometric model. Projections are of f.o.b. export prices.
Page 27
Research Report
Appendix 6: F.o.b prices versus market prices the year 2010 differential $/tonne Basis Month 1 2 3 4 5 6 7 8 9 10 11 12 Average ISSB Fo.b. 516 525 545 574 623 634 651 617 611 638 625 610 Hot rolled coil MEPS Percent Market 607 631 657 736 754 713 691 700 694 688 677 663 ISSB F.o.b. Rebar MEPS Market Percent
85% 475 552 83% 492 567 83% 506 579 78% 572 675 83% 607 681 89% 581 632 94% 553 588 88% 554 612 88% 591 639 93% 596 649 92% 594 651 92% 591 653 87.3% Adjustment factor - from f.o.b. to market prices: +13.5%
86% 87% 87% 85% 89% 92% 94% 90% 92% 92% 91% 91% 89.7%
Average world monthly prices for 2010 hot rolled coil and for rebar sales are compared using f.o.b. export prices [source: ISSB] and market prices [source: MEPS]. The f.o.b. prices appear to show a significant discount of ~10-13%. For current steel prices, visit http://www.steelonthenet.com/price_info.html
[END OF REPORT]
Page 28
Research Report
ABOUT MCI
Metals Consulting International Limited (MCI) is a UK-based firm of management consultants, specialising in the provision of independent advisory consulting services relating to the European metals industries. The advisory or support services include:
MCIs core services: Assistance with due-diligence, privatisation, restructuring, modernisation, strategy formulation, business planning, performance turnaround and profit improvement. MCI additional services: Assistance with partner search, acquisition appraisal, forecasting, market studies, staff training.
During the course of the last 20 years MCIs consulting professionals have worked for a wide range of clients including national Governments, Government bodies, the European Commission, the World Bank, the EBRD, private sector banks, actual and potential metals company buyers and sellers, and metals companies themselves. This work has centred on steel and metals businesses across Europe [East and West]. MCIs Consultants also have significant industry experience from assignments in North & South America, Africa and Asia-Pacific. To request copies of client testimonials, for further information and assistance, or for an initial no-obligation discussion please contact: Andrzej M Kotas, Managing Director Metals Consulting International Limited 22 Nesta Road Woodford Green Essex IG8 9RG United Kingdom
+44 +44
(0) 208-504-2805 (0) 775-149-0885 amkotas
Email: MCI@steelonthenet.com
Web: http://www.steelonthenet.com
Page 29

MCI Steel Price Projections Report

Enviado por

Dados do documento

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

MCI Steel Price Projections Report

Enviado por

Direitos autorais:

Formatos disponíveis

WORLD STEEL PRICE PROJECTIONS

ECONOMETRIC MODELLING REPORT April 2011

Metals Consulting International Limited http://www.steelonthenet.com

Metals Consulting International Limited

For further info, visit: http://www.steelonthenet.com

Econometric modelling report steel prices April 2011

Metals Consulting International Limited

Econometric modelling report steel prices April 2011

Metals Consulting International Limited

Source: http://www.steelonthenet.com. Figures are average world f.o.b. export prices.

Metals Consulting International Limited

Other abbreviations are as defined in the text.

Econometric modelling report steel prices April 2011

Metals Consulting International Limited

Product definitions and price levels

Metals Consulting International Limited

HISTORIC STEEL PRICES Price levels and price volatility

Source: ISSB. Figures are average world f.o.b. export prices.

Econometric modelling report steel prices April 2011

Metals Consulting International Limited

Metals Consulting International Limited

FUTURE STEEL PRICES The MCI econometric model

Metals Consulting International Limited

Index [Jan 1996 = 100]

300 250 200 150 100 50 0 1996

Average steel price

Thermal coal price index [USA]

Econometric modelling report steel prices April 2011

Metals Consulting International Limited

Source: MCI analysis. For original price data, see Appendix 2.

Index [Jan 1996 = 100]

Average steel price

Natural gas price

Source: MCI analysis. For original price data, see Appendix 2.

Index [Jan 1996 = 100]

Average steel price

Electricity price index

Econometric modelling report steel prices April 2011

Metals Consulting International Limited

Source: MCI analysis. For original price data, see Appendix 2.

Index [Jan 1996 = 100]

Average steel price

Iron ore price index

Source: MCI analysis. For original price data, see Appendix 2.

Index [Jan 1996 = 100]

Average steel price

Thermal coal price index [Aust]

Econometric modelling report steel prices April 2011

Metals Consulting International Limited

Source: MCI analysis. For original price data, see Appendix 2.

Econometric modelling report steel prices April 2011

Metals Consulting International Limited

Index [Jan 1996 = 100]

300 250 200 150 100 50 0 1996

Average steel price

Metallurgical coal price index

Source: MCI analysis. For original price data, see Appendix 2.

Index [Jan 1996 = 100]

350 300 250 200 150 100 50

Average steel price

Ferrous scrap price index

Source: MCI analysis. For original price data, see Appendix 2.

Metals Consulting International Limited

Leading steel price indicators