The prices for the most important raw materials for blast furnace-based steel production—ore, coal, coke, scrap—have been trending downward in the past business year. At the same time, price fluctuations for iron ore have been less pronounced than in the previous years. While the price of fine ores on the spot market ranged between USD 130 and 140 (CFR China) in the early part of the business year 2013/14, it fell in the following months to USD 110, before returning to its initial level over the summer months. The unexpected rise was largely due to an increase in demand for iron ore by Chinese steel manufacturers. The following lateral shift of the price continued until the end of the calendar year before dropping again to under USD 110. Experts on the raw materials market by and large agree that ore prices will tend to go down further in the coming years, however, the magnitude of this price decline is unknown. Against this backdrop, a number of major iron ore producers announced during the past year that they intend to scale down some of their medium-term investment and expansion plans.
In the second half of the business year 2013/14, there was more demand for lump ore and pellets than for fine ore in China for environmental reasons. As a result, the price difference between these categories and fine ores increased significantly.
Prices for coking coal continued to fall steadily in 2013/14, as has been the case since early 2011. The price for one ton of coking coal on the spot market (FOB Australia) has been moving toward the USD 100 mark since the end of the business year; in the past three years, its price has fallen by about two thirds. The reasons for this are, on one hand, availability of additional coal resources from Mongolia, which are being utilized primarily by Chinese steel manufacturers, thus limiting their import requirements from Australia and Canada, and on the other that coal producers worldwide have not experienced production stoppages due to inclement weather since 2011.
Similarly to coking coal, procurement costs for coke have declined substantially in recent years, with the price dropping from USD 500 to just over USD 200 per ton (FOB Russia, Columbia, Japan) in the past three years. As a result, the price differential between coking coal and coke—and thus the value-added for refining and processing—has gone down to about USD 100.
Prices for iron and steel scrap, which is used as supplementary input material in steel mills in addition to liquid iron smelt, are subject to the regional development of supply and demand, which tends to be less volatile than prices for iron ore, coal, and coke. In the business year 2013/14, the price per ton of scrap fluctuated between EUR 250 and 290.
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, we are not anticipating any problems regarding the availability of raw materials.
