The prices of the raw materials iron ore and coking coal, which are vital for steel production, remained highly volatile throughout the business year 2012/13. In recent years, a very transparent spot market has developed for these two raw materials, which makes all the critical information about pricing available online. Therefore, the pricing model today is not based on annual, half-yearly, or quarterly prices as it was in the past—even with mining operators with whom one has had a longstanding relationship—but is instead on an up-to-the-minute basis.
Starting at around USD 150 for a ton of iron ore on the spot market (CFR China) at the beginning of the business year 2012/13, from the spring of 2012 onward, there was an initial downward trend until, subsequently, a certain stabilization occurred. During the summer months, the iron ore price collapsed and by early September 2012, it reached its lowest level to date at less than USD 90 per ton. This development is based on a weaker demand for ore by Chinese steel producers as their domestic economic outlook deteriorated. By pushing through infrastructure projects and taking additional measures to bolster the economy, subsequently, the Chinese economy stabilized. Anticipating increasing crude steel production figures, toward the end of 2012, prices on the iron ore spot market began to rise to more than USD 150 per ton. As doubts mounted that construction activity would be sustainable due to the extremely cold winter in China, toward the end of the business year 2012/13, the iron ore prices again began to decline and since then, they have been fluctuating in a range between USD 130 and 140 per ton.
The price decline for coking coal that began in early 2011 continued in the business year 2012/13.
Starting at a per ton price of around USD 300 in January 2011, the price did not begin to stabilize until the fall of 2012 at about USD 150 per ton. An additional reason for this is the supplementary supply of coal from Mongolia edging into the market that is primarily destined for the Chinese steel industry, which then, in turn, needs to buy less coal internationally. Furthermore, the large mine operators in Australia have been mostly spared production stoppages due to inclement weather, which they had had to deal with in previous years.
The trend for coke, a product refined from coking coal, has been similar to that of coal. The price on the spot market, which was still at USD 500 per ton in early 2011, had fallen to under USD 300 per ton in the course of the business year 2012/13. The fact that in early 2013 China did away with the 40% export tax on coke most recently put even more pressure on the price of coke.
Price movements for scrap—also a basic material for the production of steel—were much more moderate. As was the case in recent years, in the business year 2012/13, the scrap price has been moving within a certain range around EUR 300 per ton. The price trend for the most important alloy metals was likewise largely unremarkable.
The long-term raw materials strategy of voestalpine AG continues to aim for a diversified and broad basis of supply sources in order to avoid becoming dependent on individual suppliers. From today’s perspective, problems regarding the availability of raw materials are not being anticipated.
