It’s commonly stated that steel is a commodity product. As known to most people, they are usually undifferentiated standard products – with much competition within the global logistics. Therefore, the issue arises: being a steel maker, can you really differentiate one’s product mix to make more profit?
The Value Chain
The answer to that question is a yes for sure. Steel itself includes a variety of products. It comprises slab and billet (that are generally known as semi-finished products). But downstream of slab and billet, also we have items that tend to be way better in terms of value:
- In flat products, in ascending order by value – plate and hot-rolled coil and sheet, cold-rolled steel, zinc coated sheet and coil, and painted steel – which is mostly hot dip galvanized steel then covered with a plastic coating for added anti-corrosion protection.
- In long products, in ascending order by value – heavy sections and rail, hot rolled bar and lightweight sections (including merchant bar), wire fishing rod and attracted wire
- In tubular products, in ascending order by value – both seamless and welded steel tube – typically being threaded or coated frequently also provide much greater value.
Higher Value Grades
One approach to add value to a steel manufacturer would be to produce more complicated grades of steel. Instead of making plain carbon grades, some steelmakers also produce a variety of alloy steels. Additions of a number of alloying elements during steelmaking process improves the qualities from the steel, most abundant in common alloying elements being manganese, chrome, molybdenum and nickel. Stainless is easily a type of alloy of carbon and iron which has a minimum chromium content close to 10.5%. Another quality value number of steels is tool steel: these have high potential to deal with abrasion and because the name suggests these steels are specifically suitable towards the output of tools (including rubber stamping dies, shear blades and hands tools).
Market Factors to Considerate
Obviously, once we change from manufacture of fundamental steels [e.g. commodity hot folded coil or reinforcing bar] to higher value steel products, therefore the total amount of interest in these steels in many markets declines. For instance, stainless demand volume is usually around 2% of demand volume for carbon steel. However, the cost per tonne of greater-value steels could be five or ten occasions greater compared to cost of carbon steel. An essential matter is also that transport costs dwindle relevant whenever you make niche steels. That’s, although a transport price of $25 / tonne is most likely quite significant poor a steel offered for $500 / tonne, that price is obviously much less important once the steel is offered for $5000 / tonne. The conclusion here’s that although commodity steels can profitably be offered across a distance as high as a couple of hundred miles (for the most part), alloy along with other special steels (e.g. stainless) can generally be exported all over the world.
For readers who are curious about this subject, our website displays the steel value chain along with the latest world steel prices.