[TheForge] Price of steel & scrap

[theforge@mailman.qth.net]

On Thursday, April 1, 2004, at 12:59  AM, Mike wrote:

>   Now the Chinese steel industry is ramping
> up fast, producing something like half the world's steel.  FWIW,
> - Mike
>

Mike, The chart that came with this article said that China's 2003 
steel production
was 220.1 million metric tons. Japan is second with 110.5 and USA third 
with 90.4.
China's number was a 21.1% increase over 2002. USA was -1.3% over same 
period.

When China starts driving all the cars that they are making from all 
the steel I wonder
how high gas prices will go? It might be a good idea to double the size 
of your garden
this year. I think we are in for a hell of a ride.

Bob
___

China's Steel Industry Looks Abroad
By  PAUL GLADER, WSJ 31/3/04
Mar 31, 2004, 09:36

China is venturing abroad to secure the raw  materials needed to 
produce steel, as its hunger for an essential ingredient to  the 
world's economy drives up prices around the globe. Chinese steel 
producers are striking deals with  foreign suppliers to ensure steady 
sources for increasingly scarce materials  such as iron ore, needed to 
make basic carbon steel, and nickel, which is used  to make stainless 
steel. Meanwhile, one Chinese steel producer is planning to  build a 
steel mill in Brazil that would ship its production back to  China.

The moves come as China considers other ways to lock  in the materials 
it needs to fuel its booming economy. Its  demand has boosted prices 
for everything from energy to rubber, but some raw  materials -- 
notably petroleum and iron ore -- are in short supply within its  
borders. China's energy industry has sought to buy stakes in overseas 
oil  reserves, especially in the Middle East, though with limited 
success so  far.

In the short term, the move could lead to  still-higher prices of raw 
materials. But long-term, China's investments could add to global 
supplies. "If they don't help develop new sources for raw  materials, 
the rest of the world will have a hell of a time," said Charles Blum,  
president of Washington consulting firm International Advisory Services 
Group  Ltd.

Currently, China is the world's largest steel  producer, with a 30% 
share of global production. It is expected to see its  production grow 
19% this year, with 16 blast furnaces under construction. But it  is 
also the world's largest steel consumer, because of increased purchases 
of  washing machines, refrigerators and cars, as well as the building 
of facilities  for the 2008 Summer Olympics in Beijing.

One deal made in recent months will supply China's  steelmakers with 
iron ore from North America. A shuttered Minnesota mine was  reopened 
late last year under a new ownership agreement between Chinese  
steelmaker Laiwu Steel Group Ltd. and Cleveland-Cliffs Co., an Ohio  
mining company. The two companies agreed to buy EVTAC Mining Co., which 
had  filed for Chapter 11 bankruptcy-court protection and laid off 
about 400 workers.  Laiwu holds a 30% stake, while Cleveland Cliffs 
owns 70% in the operation, now  called United Taconite.

Under the agreement, Laiwu will own 30% of the 3.9  million metric tons 
produced annually at the mine, but will receive its taconite  pellets, 
which are made from iron ore and used to make steel, for the next 12  
years from a Cliffs' mine in eastern Canada because it is easier to 
ship from  there.

China is pressing on to other areas, including  Australia and South 
America. In Australia, four Chinese steel mills reached a  tentative 
agreement with BHP Billiton Ltd., one of the world's largest  producers 
of iron ore, to provide 12 million metric tons of ore annually over  
the next 25 years for $9 billion. The four Chinese steel mills will 
each get a  guaranteed supply of iron ore from BHP's Jimblebar mine in 
Western Australia  during the contract period. "In the Chinese 
industry, if you don't have your own  iron ore, you are going to pay 
through the nose," said Peter Marcus, partner of  World Steel Dynamics, 
a steel analysis research group in New Jersey.

State-owned mining company China Metallurgical  Construction Corp. has 
agreed to a $650 million investment in a mining project  in Papua New 
Guinea. It will build and operate a mine and will own 85% of the  
shares and the entire output of 33,000 metric tons of nickel a year 
under the  agreement. The output would go toward creating 
stainless-steel products in  China. China also hopes it will gain 
access to Papua New Guinea's timber,  minerals and fish.

China's largest steel company, Shanghai Baosteel  Group, is going a 
step further. It plans to build an estimated $1.5 billion  
blast-furnace operation in Sao Luis, Brazil. The proposed mill would 
produce  about 3.7 million metric tons of steel slabs each year, 
boosting Baosteel's  global steel production by 20%. Baosteel is in 
discussions with Companhia  Vale do Rio Doce SA, the largest iron-ore 
exporter in the world, and  Luxembourg's Arcelor SA, the world's 
largest steelmaker, regarding the  mill.

Most analysts believe Baosteel plans to ship steel  slabs back to China 
for processing, which would be cheaper than shipping back a  boatload 
of iron ore. The operation in Brazil also would give Baosteel  
flexibility to sell the slabs to other parts of the world.

Chinese investment is paying off in Minnesota's Iron  Range region, 
which has struggled amid the decades-long decline in the U.S.  steel 
industry. A number of iron-ore mines in the region have closed over the 
  past two decades, with the number of workers on the range is down to 
about 3,700  today from 6,200 a few years ago. But many of the workers 
have returned with the  new activity.

"Two years ago, it was all gloom and doom in the  iron range," said 
John Rebrovich, staff representative for the United  Steelworkers 
Association District 11 labor union. But, with a world-wide  shortage 
of raw materials and a reopened mine, he said small towns are "a little 
  upbeat now."