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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (31578)	6/6/2005 3:34:05 PM
From: RealMuLan	Respond to of 116555

Those iron ore producers killed a golden goose who lay eggs<g> and also ended up hurting everyone.

To: mishedlo who wrote (31578)	6/6/2005 3:47:56 PM
From: CalculatedRisk	Read Replies (3) \| Respond to of 116555

My New Reading List calculatedrisk.blogspot.com

To: mishedlo who wrote (31578)	6/7/2005 7:52:08 AM
From: zonder	Read Replies (2) \| Respond to of 116555

Re steel industry: Thanks for the recap of recent news from China, mish. As for analysis of steel prices, especially re housing & automotive: There are two important considerations without detail observation into which you cannot really draw conclusions on steel: (1) All steel is not produced from iron ore. Almost all of the newer mills (of the last twenty years or so) are "mini-mills" that start with scrap steel, not iron ore. They are more efficient and cost much less to set up than "integrated mills" that start with iron ore, produce steel, and then go on to produce steel products. Most mini-mills use "electric arc furnaces" and so electricity makes up almost 80% of their cost of goods sold. Their fortunes depend on electricity prices in their region and not on iron ore at all. Hence, it is a mistake to assume all steel steel sector is affected by price and availability of iron ore. (2) Different subsectors of steel are involved in automotive/household electronics/etc and construction. "Flat steel" (hot-rolled or cold-rolled coils, sheets, etc) is used in automotive/refrigerators/etc while "long steel" (rebars etc) are used in construction. In the market, there are zillions of mini-mills producing long steel from scrap whereas flat steel production is not as much saturated at all, since most of the earlier mini-mills don't produce flat steel. So, it is best to treat these two main types of steel as slightly different animals and look at them seperately, as they have not only different demand structures but also different raw materials and hence cost structures.