The prices of the input materials—iron ore and coal—that are key to the production of steel in blast furnaces followed a continuously rising trend in the business year 2018/19 that reached a challenging level toward its end. In the business year’s first three quarters, the spot prices for iron ore (the most important raw material for the aforementioned method) fluctuated between USD 65 and USD 75 per ton (cost and freight (CFR) China) and thus were less volatile than in previous business years. Overall, however, iron ore prices followed a robust trend driven by a noticeable increase in the production of steel in China, which accounts for more than 50% of worldwide steel production and thus occupies a controlling global position. By now, China imports more than one billion tons of iron ore annually by sea, because it decided for quality reasons to gradually reduce its self-sufficiency regarding iron ore. Both the solidity of steel prices in the domestic market and environmental issues contributed to the country’s need to import higher-rated iron ore from Australia and Brazil. Iron ore supply and demand were largely balanced throughout the calendar year 2018 due to the advantageous, demand-driven situation and despite yet another push on the part of the major mine operators in the aforementioned two countries to expand capacities. This equilibrium ended abruptly at the start of the calendar year 2019, however, when a dam in an iron ore mine in the Brazilian state of Minas Gerais failed, triggering a humanitarian and ecological catastrophe. The operations of the affected company’s other mines of the same or a similar type were closed for security reasons. Experts believe that this has removed some 100 million tons of iron ore capacity from the market on an annual basis, at least temporarily. The situation was aggravated in March 2019 when a cyclone hit Western Australia, damaging the infrastructure needed to ship iron ore in the affected region. Initially, the global iron ore spot market price skyrocketed in the last quarter of the business year 2018/19 against this backdrop, and subsequently remained at a level of between USD 85 and USD 95 per ton. Because the dam break in Brazil had an impact not just on fine ore (the base product), but also on the production of iron ore pellets, there was a shortage of relevant supplies which, in turn, triggered yet another increase in the price of this high-quality input material.
As far as the second base material—metallurgical or coking coal—for the production of steel by blast furnace process is concerned, structurally speaking general price levels have risen substantially in recent years due to both mine closings in China by order of government agencies and a reduction in the annual number of workdays in Chinese coal mines. Furthermore, the past two years saw erratic price fluctuations resulting from temporary supply bottlenecks caused by freak weather in Australia and China. As the major coal deposits largely did not experience even greater, weather-related capacity losses during the business year 2018/19, recently the price volatility declined and spot buying prices settled at a level of between USD 175 and USD 230 per ton (free on board (FOB) Australia).
High-quality scrap is used in both the Steel Division and the Metal Engineering Division to supplement pig iron, for one, and it is the main raw material for the production of special steel in the electric arc furnaces of the High Performance Metals Division, for another. At the start of the business year 2018/19, the price for high-quality scrap (type E3, Germany) was about EUR 300 per ton but, by the end of March 2019, the price had fallen slightly below this level to about EUR 285 per ton subject to considerable volatility throughout the business year.
An even more uneven and especially volatile development occurred during the business year 2018/19 with respect to the alloy elements that are indispensable to steel processing. Alloys are an important base material particularly, but not only, for the production of special steel and thus are a material cost factor especially in the High Performance Metals Division.
While the price of molybdenum trended laterally for most of the past business year, the price of chromium dropped sharply following a steep increase at the start of the business year. Prices for nickel, the most valuable element in the alloy portfolio, fluctuated wildly as well during the business year. Following a steep rise in the first business quarter of 2018/19 to more than USD 15,500 per ton, subsequently the price at the London Metal Exchange gradually dropped back down to about USD 10,500, only to climb back up again to about USD 13,000 in the business year’s last quarter. But the price of vanadium experienced the strongest fluctuations by far during the past business year. In the first three business quarters of 2018/19, the price almost doubled to more than USD 125,000 per ton due to the growing significance of electromobility. After peaking in November 2018, however, it dropped back down sharply to less than USD 60,000 per ton. The price of zinc, which is used primarily in the Steel Division, fluctuated during the business year 2018/19 between USD 2,300 and USD 3,000 per ton.