Will vertical integration in the steel industry reach new heights? Report

Insight 03 October 2013

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Report summary

Steel producers have pursued a greater level of vertical integration in recent years, as market volatility and raw materials prices rose between 2009 and 2011. Now, with margins in the steel industry suffering, the cost of increasing vertical integration through captive, wholly owned mining assets is too high for many cash strapped steel producers. However, we expect steel companies will continue to look for ways to secure raw materials longer term.

Why has vertical integration into mining assets increased in recent years?
The effect of vertical integration on cost competitiveness
The future for vertical integration
Appendix

Tables and charts

This report includes 12 images and tables including:

Steel & Raw materials prices indexed - 2000 = 100
2013 Steel Cost Service iron cost curve by company
Percentage self-sufficiency against cost of iron production - 2013

Percentage self-sufficiency against cost of iron production - 2015
Average delivered annual cost per tonne of iron ore vs 62% Fe fines FOB western Australia
Average delivered annual cost per tonne of iron ore vs benchmark 62% Fe fines FOB western Australia
Analysis of captive raw materials by company in 2013
Average delivered annual cost per tonne of coal vs US Low Vol HCC FOB
Average delivered annual cost per tonne of coal vs benchmark QLD Australia FOB HCC benchmark
Steel assets considered in this insight
Selection of captive mines wholly owned by steelmakers
Selection of mining equity shares of steel makers