Below is a presentation I made recently at the SMA Board of Directors meeting in Florida. It deals with the issue of organizational size in today’s steel industry and asks some questions (more than providing any answers) about how the structure of steel organizations will change as they deal with much different dimensions of scale and scope. It also contains some provocative “Zipfian” statistical analysis of industry structure that raises questions as to how consolidation might proceed both in the US and globally.
In the end, there is no argument for or against big or small organizations here. Mittal after all was producing less than 500KT 20 years ago. But in the future, our industry will be populated by much larger organizations than it is today. Organizational innovation is going to be vital to the strategic health of any company of any size that wants to remain successful and independent. Click on the presentation’s ‘Menu’ button (lower right) to see a larger view.
CVRD, the largest producer of iron ore in the world, has just reached an agreement with some of the major Asian steel producers to increase 2008 benchmark iron ore prices by 65% to 71%. A typical integrated steel maker uses roughly 1.4 short tons of iron ore pellets to produce a short ton of hot rolled coil. So, a 65% increase in the price of ore translates into a $60 per ton increase in steel manufacturing costs.
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For those of you who are following US long products imports, December actual import figures have now been published, and are almost 30,000 short tons less than November imports, confirming low import licenses collected for the month. You can view the updated data from my earlier post related to January import licenses.