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Raw materials

In the business year 2015/16, the price trend for the raw materials that are of primary importance for steel production was largely recessive, albeit not quite intensely as had been the case in the business year 2014/15, with the exception of prices for scrap and alloys. Iron ore, the most important raw material as far as volume is concerned, experienced a dramatic price decline in 2014 that was triggered by an extreme expansion of capacity by mine operators, who anticipated far too optimistic growth prospects in the global—and especially the Chinese—steel industry when making their projections.

The downtrend in the 2015 calendar year is, however, also the result of the fact that global steel production is down for the first time in many years. Two years ago, the price on the spot market for a ton of fine ore (CFR China) had still been at around USD 130, while in December 2015 it was under USD 40. Although the market dominance in the mining sector is concentrated among only a few companies—more so than in virtually any other sector—the price of iron ore fell by roughly 70% between January 2014 and December 2015. The major mining companies in Australia and Brazil reacted to this with massive cost-cutting programs and this—together with changes in currency parities and the drastic drop in the oil price—contributed to the reduction of the cost basis relating to mining and transport of iron ore. Operators of smaller and less profitable mines could not withstand the cost pressure and were forced to close their mines, at least temporarily. Notwithstanding these developments, in the first calendar quarter of 2016, the iron ore markets remained highly volatile. A combination of factors—a weakening of the US dollar, (assumed) improved growth prospects for the Chinese steel industry, and at the same time, unusually low inventories of steel—resulted in an increase of the iron ore price during the quarter by around 50% so that by the end of March 2016, it was at around USD 60, about the same level as at the beginning of the business year 2015/16.

In contrast to iron ore, the price decline of coking coal had begun by the early part of the 2011 calendar year and continued until the end of the business year 2013/14. The most significant factors were the additional supply of coal, especially from Mongolia, and the fact that there have not been any major production losses since the flooding in the coal mining areas in Australia in early 2011. After a phase of stability in the business year 2014/15, during which the spot market price for a ton of coking coal (FOB Australia) remained at around USD 110, in the past business year, it again weakened, fluctuating within the range of USD 80 to 90 per ton. The decline in the business year 2015/16 is due to the fact that China has largely become self-sufficient as far as coking coal is concerned and has drastically reduced imports. In this environment, it has become impossible for some US manufacturers to remain competitive so that, as a result, capacity has been removed from the market.

Price deterioration of coke has been similar both as far as volume is concerned and the time trajectory. In early 2011, the price of a ton of coke (FOB China) was still at USD 500. In the subsequent year, not only did the coke price drop dramatically, but also the difference to the price of coking coal. As a result, by the end of the last business year, the price of a ton of coke had plummeted to USD 115.

The price of scrap fell to a similar extent as iron ore, although the decline began somewhat later; by the summer and fall of 2015, it had plunged to EUR 165 (type E3, Germany) per ton, from USD 240 per ton at the beginning of the business year.

Procurement costs for the most important alloys, which are a significant cost factor particularly in the Special Steel Division, also went down substantially in the business year 2015/16. Declines in price, especially for molybdenum, vanadium, and chromium, have ranged between 20% and 30% within the course of a single year. The price of nickel, the cost of which is the most expensive item in the alloy portfolio, has dropped in the same period of time by almost one third.

About voestalpine

The voestalpine Group is a steel-based technology and capital goods group that operates worldwide. With its top-quality products, the Group is one of the leading partners to the automotive and consumer goods industries in Europe and to the oil and gas industries worldwide.


50 Countries on all 5 continents
500 Group companies and locations
48,500 Employees worldwide

Earnings FY 2015/16

€ 11.1 Billion


€ 1.6 Billion


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